Ownership versus environment: disentangling the sources of public sector inefficiency

Ann P. Bartel and Ann E. Harrison

No 2272, Policy Research Working Paper Series from The World Bank

Abstract: The authors compare the performance of public and private sector manufacturing firms in Indonesia for 1981-95. They analyze whether public sector inefficiency is due primarily to agency-type problems ("ownership") or to the business environment in which public enterprises operate, as measured by soft budget constraints or barriers to competition. They nest the two alternatives in a production function framework. The results, obtained from fixed-effects specifications, provide support for both models. The business environment matters. Only public enterprises that received loans from state banks or those shielded from import competition performed worse than private enterprises. Ownership matters. For a given level of import competition or soft loans, public enterprises perform worse than their counterparts in the private sector. Eliminating soft loans to Indonesia's public enterprises would raise total factor productivity by 6 percentage points; the same result could be achieved by increasing import penetration by 15 percentage points. The authors show that these findings are not due to selection effects for either privatization or the receipt of soft loans.

Keywords: Labor Policies; Banks&Banking Reform; Municipal Financial Management; Environmental Economics&Policies; Economic Theory&Research; Banks&Banking Reform; Municipal Financial Management; Environmental Economics&Policies; Economic Theory&Research; Public Sector Economics&Finance (search for similar items in EconPapers)
Date: 2000-01-31
View list of references View citations in EconPapers

Downloads: (external link)
http://www-wds.worldbank.org/servlet/WDSContentSer ... d/PDF/multi_page.pdf (application/pdf)

Related works:
Journal Article: Ownership Versus Environment: Disentangling the Sources of Public-Sector Inefficiency (2005)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:wbk:wbrwps:2272

Access Statistics for this paper

More papers in Policy Research Working Paper Series from The World Bank
Address: 1818 H Street, N.W., Washington, DC 20433
Contact information at EDIRC.
Series data maintained by Roula I. Yazigi ().