Economic reforms aimed at reducing state roles vary widely across regions. This study examines privatization effectiveness in postcommunist Russia, focusing on regional variation in public administration size. Using a multilevel design that controls for pre-reform selection, we analyze the relationship between state bureaucracy and firm productivity post-privatization.

The Puzzle: Why did privatization yield different results across Russian regions?

Our findings reveal a counterintuitive pattern: privatization was more effective in areas with larger bureaucracies.

What Drives This Effect?:

The improved outcomes stem from the positive impact of large bureaucracies on institutional quality and corruption levels, creating better conditions for private enterprise.

Key Takeaways:

* Russia's postcommunist context shapes privatization impacts

* Multilevel analysis accounts for pre-existing regional differences

* Bureaucracy size significantly influences business environment improvement