Workhorses or White Elephants: The Impacts of Earned Autonomy on State-Owned Enterprises

• Departmental Seminar
• Development Workshop

Date and Location

Tuesday, April 30, 2019, 4:10 PM - 5:30 PM
ARE Library Conference Room, 4101 Social Sciences and Humanities

Abstract

State Owned Enterprises (SOEs) comprise a significant proportion of economic activity in many countries. However, relatively little is known about which policies or practices optimize SOE outcomes, or how their organizational structure impacts the extent to which they trade off profitability with other objectives (such as employment generation). In particular, managerial autonomy may change both the relative efficacy with which SOEs are run, as well as the relative weights on different SOE objectives. Using a newly constructed dataset, I test whether an earned autonomy program in India that decentralized strategic decisions like capital expansion and labor restructuring to profitable SOEs’ board of directors affected their performance. I find that autonomy allows SOEs to increase their capital stock, as well as increase their sales and profits. I also show that these results seem to be caused by SOE managers’ career concerns around gaining a board seat in the private sector. The probability I match a SOE manager to a private firm board increases by about 3 percentage points (over a mean of about 66%) in the years after the SOE they manage receives autonomy. These results indicate that large gains in SOE performance are possible without privatization, and may occur partly through SOE managers’ career concerns