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

Loading...
Thumbnail Image
Penn collection
Management Papers
Degree type
Discipline
Subject
Business Administration, Management, and Operations
Economics
Funder
Grant number
License
Copyright date
Distributor
Related resources
Author
Bartel, Ann P
Harrison, Ann E
Contributor
Abstract

An unanswered question in the debate on public-sector inefficiency is whether reforms other than government divestiture can effectively substitute for privatization. Using a 1981–1995 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.

Advisor
Date Range for Data Collection (Start Date)
Date Range for Data Collection (End Date)
Digital Object Identifier
Series name and number
Publication date
2005-02-01
Journal title
The Review of Economics and Statistics
Volume number
Issue number
Publisher
Publisher DOI
Journal Issue
Comments
Recommended citation
Collection