State bureaucracy: hindering or helping? Why privatization succeeded where it failed in postcommunist Russia.

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