M-form hierarchy with poorly-diversified divisions: A case of Khrushchev's reform in Soviet Russia

Andrei Markevich and Ekaterina Zhuravskaya

Journal of Public Economics, 2011, vol. 95, issue 11, 1550-1560

Abstract: We test the premise of the theoretical literature that M-form political hierarchies are effective in creating yardstick competition between regional divisions only when those divisions have sufficiently diversified or similar industrial composition. The reason for this is that the competition among poorly diversified inter-related divisions creates incentives for regional leaders to pursue policies that inhibit industrial growth in neighboring regions in order to make their own region look better from the point of view of the center. We use a unique episode in Soviet history, when a traditional Soviet unitary-form (U-form) hierarchy was replaced by a multidivisional-form (M-form) organization, namely, Khrushchev's Sovnarkhoz reform. First, we demonstrate that during this reform regional leaders were subjected to relative performance evaluation, which created incentives to generate industrial growth. Second, we show that these career concerns resulted in higher growth in regions with sufficiently diversified and, therefore, self-contained economies, and lower growth in highly specialized regions.

Keywords: M-form hierarchy; Yardstick competition; Soviet economy; Diversification (search for similar items in EconPapers)
JEL-codes: D73 H7 J63 N44 P3 (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Working Paper: M-form hierarchy with poorly-diversified divisions: a case of Khrushchev?s reform in Soviet Russia (2011)
Working Paper: M-form hierarchy with poorly-diversified divisions: A case of Khrushchev's reform in Soviet Russia (2011)
Working Paper: M-form hierarchy with poorly-diversified divisions: A case of Khrushchev's reform in Soviet Russia (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:pubeco:v:95:y:2011:i:11:p:1550-1560

DOI: 10.1016/j.jpubeco.2011.06.003

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