Ownership versus Environment : Disentangling the Sources of Public Sector Inefficiency
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 wh...
| Main Authors: | , |
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| Format: | Working Paper |
| Language: | English en_US |
| Published: |
World
2015
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2000/01/438963/ownership-versus-environment-disentangling-sources-public-sector-inefficiency http://hdl.handle.net/10986/22267 |
| Summary: | 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. |
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