9320843 Shleifer Privatization of state enterprises has been one of the most important economic changes that the world has seen in the last two decades. In several dozen countries, including France, Britain, Italy, the United States (Conrail), as well as many countries in Asia, Africa, and Latin America, public enterprises have been transferred to the private sector. An even more striking change is privatization in Eastern Europe and Russia, where almost whole economies are being transferred from public to private ownership. While it is generally believed that private enterprise operates more efficiently than state enterprise, there is very little work to explain why this is so. For example, is it the fact that politicians have direct control over operating decisions in public sector firms or is it the fact that any residual cash flow accrues to the Treasury? This project investigates empirically and theoretically the relative efficiency of state and private enterprises in different countries depending on such factors as public vs. private ownership of cash flows, political vs. managerial control of firms, levels of political corruption, degree of political competition and the nature of the electoral system, and the importance of the civil service. The institutional and empirical work focuses on the privatization process and its aftermath in Russia and Eastern Europe with particular emphasis on Russia. The broad areas of focus are: 1) trends in the privatization process itself; 2) the evolution of ownership structure and corporate governance; and 3) the credit and subsidies to newly privatized vs. public firms. The project uses firm-level data available through Russian government sources as well as data from a survey conducted by the investigators.
