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

Ekaterina Zhuravskaya and Andrei Markevich

No 8221, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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 divisions have sufficiently diversified or similar industrial composition. The reason is that the competition among poorly-diversified inter-related divisions creates incentives for regional leaders to pursue policies that hurt growth of the 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, the Khrushchev?s 'Sovnarkhoz' reform. First, we demonstrate that during this reform regional leaders were subjected to relative performance evaluation which created career concerns 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 resulted in lower growth in highly specialized regions.

Keywords: Diversification; M-form hierarchy; Soviet economy; Yardstick competition (search for similar items in EconPapers)
JEL-codes: D73 H7 J63 N44 P3 (search for similar items in EconPapers)
Date: 2011-02
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

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Journal Article: 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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