Economic reforms aimed at reducing state roles vary widely across regions. This study examines privatization effectiveness in postcommunist Russia, focusing on regional variation in public administration size. Using a multilevel design that controls for pre-reform selection, we analyze the relationship between state bureaucracy and firm productivity post-privatization.
The Puzzle: Why did privatization yield different results across Russian regions?
Our findings reveal a counterintuitive pattern: privatization was more effective in areas with larger bureaucracies.
What Drives This Effect?:
The improved outcomes stem from the positive impact of large bureaucracies on institutional quality and corruption levels, creating better conditions for private enterprise.
Key Takeaways:
- Russia's postcommunist context shapes privatization impacts
- Multilevel analysis accounts for pre-existing regional differences
- Bureaucracy size significantly influences business environment improvement
