Ownership Versus Environment: Disentangling the Sources of Public-Sector Inefficiency

By Ann P. Bartel, A. Harrison. Review of Economics and Statistics, 2005

149 citations recorded by the source corpus.

An unanswered question in the debate on public-sector inefficiency is whether reforms other than government divestiture can effectively substitute for privatization. Using a 19811995 panel data set of all public and private manufacturing establishments in Indonesia, we analyze whether public-sector inefficiency is primarily due to agency-type problems or to the environment in which public-sector enterprises (PSEs) operate, as measured by the soft budget constraint and the degree of internal and external competition. The results, obtained from fixed-effects specifications, provide support for both models. Ownership matters because, for a given level of government financing or competition, PSEs perform worse than their private-sector counterparts. The environment matters because only PSEs which received government financing or those shielded from import competition or foreign ownership performed worse than private enterprises. The results suggest that the efficiency of PSEs can be increased through privatization, through manipulation of the environment, or through a combination of both approaches.

Subfields: Economics and Econometrics, Sociology and Political Science, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/bb893b3277345db23cd0247d99a90409ee46b223

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Economics and Econometrics

In Sociology and Political Science

In Strategy and Management

Citations in the corpus

New Varieties of State Capitalism: Strategic and Governance Implications (2015, background): “For instance, research finds that intra-industry competition has a positive effect on SOE performance (e.g., Bartel & Harrison, 2005).”
Government, Venture Capital and the Growth of European High-Tech Entrepreneurial Firms (2014, methodology): “…check proposed by Laporte and Windmeijer (2005) appear to exclude reverse causality concerns, we perform several additional ‘placebo leads’ tests (Bartel and Harrison, 2005; Samila and Sorenson, 2011) by introducing into our FE regressions the leads (at time t and t+1) of the VC-step dummies…”
Partial Privatization and Firm Performance (2005, unknown): “∆yit = αt +∆PRIVit−1β +∆yit−1γ +∆Xitδ +∆εit, (2)”
Leviathan in Business: Varieties of State Capitalism and Their Implications for Economic Performance (2012, unknown): “Consistent with this hypothesis, Bartel and Harrison‘s (2005) empirical analysis of private and public firms in Indonesia reveals that ―there may be an agency problem”
State ownership reinvented? Explaining performance differences between state‐owned and private firms (2018, unknown): “…the United States government took over firms during World War I, the performance of such firms was not significantly different from similar private firms, mostly because they retained the monitoring mechanisms of private firms and operated in competitive markets (see also Bartel & Harrison, 2005).”
Foreign Direct Investment, Access to Finance, and Innovation Activity in Chinese Enterprises (2008, unknown): “10 This is in line with recent work by Bartel and Harrison (2005) which show that state-owned enterprises in Indonesia benefit hugely from foreign ownership in the enterprise.”