L - Industrial Organization
In the first part of this paper we argue that three reforms must be implemented if privatization is to increase efficiency. First, establishing unitary control rights within the firm. Second, making privatized firms face hard budget constraints. Third, establishing a non-corruptible judicial system and transparent bankruptcy procedures. The question arises as to what course of action should be undertaken when these reforms have not been undertaken and privatizers have only a small window of opportunity. Either they privatize hastily today, or not at all.
In the 1990s Argentina embarked on one of the largest privatization campaigns in the world as part of a structural reform plan. The program included the privatization of local water companies covering approximately 30 percent of the country’s municipalities. Since clean water and sewage treatment are critical to controlling the spread of infectious and parasitic diseases; access expansions, quality improvements, and tariff changes associated to privatization may have affected health outcomes.
Which of the democratic checks and balances—opposition parties, the judiciary, a free press—is the most critical? Peru has the full set of democratic institutions. In the 1990s, the secret-police chief Montesinos systematically undermined them all with bribes. We quantify the checks using the bribe prices. Montesinos paid television-channel owners about 100 times what he paid judges and politicians. One single television channel's bribe was five times larger than the total of the opposition politicians' bribes.
We analyze an oligopoly model in which differentiated criminal organizations globally compete on criminal activities and engage in local corruption to avoid punishment. When law enforcers are sufficiently well paid, difficult to bribe, and corruption detection highly probable, we show that increasing policing or sanctions effectively deters crime.
A significant source of uncertainty for utilities and regulators, especially in developing countries where they are pervasive in one form or the other, is the level and timing of subsidy transfers, which also act as a wealth constraint on the utility. The paper explores the properties of “menus of incentive contracts” that may be offered by a utilities regulator in the context of the hitherto unexamined interaction between subsidy delivery and regulation.
Nearly every country in the world, including India, has policies intended to promote universal access to telecommunications services, despite the absence of evidence of a market failure in the industry. Universal service policies typically involve cross-subsidies among types of telecom consumers and among telecom providers. India’s New Telecom Policy of 1999 set goals of providing telephone and Internet access in all villages by 2002. This plan was not successful, so in 2003 DoT established a program to subsidize some telecommunications services in Indian villages.
We review previous literature on productivity spillovers of foreign direct investment (FDI) in China and conduct our own analysis using a cross–section of firm data. We find that the evidence of FDI spillovers on the productivity of Chinese domestic firms is mixed, with many positive results largely due to aggregation bias or failure to control for endogeneity of FDI. Attempting over 2500 specifications which take into account forward and backward linkages, we find no evidence of systematic positive productivity spillovers from FDI.
The degree of state ownership remains significant in the Chinese economy despite more than two decades of economic reform since 1979. Most of the remaining state-owned enterprises (SOEs) are money losing, and the few exceptional ones tend to be sheltered by government protection in selected industries. Yet China has been enjoying one of the most spectacular growth experiences in world history, and much of the growth is driven by non-state-owned enterprises (non-SOEs).
Differences in wages, employment, and capital between worker-owned and capitalist enterprises are computed from a matched employer-worker panel data set from Italy, the market economy with the greatest incidence of worker-owned and worker-managed firms. These differences are related to orthodox models of the capitalist firm and worker co-op. The estimates of the wage, employment, and capital equations largely corroborate the implications of the behavioral models of the two types of enterprise.
Using firm–level data, we find that the presence of foreign firms in China is positively associated with the performance of private firms, but is negatively associated with the performance of state owned enterprises (SOEs).