Showing papers by "Andrei Shleifer published in 1996"
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TL;DR: This paper examined legal rules covering protection of corporate shareholders and creditors, the origin of these rules, and the quality of their enforcement in 49 countries and found that common law countries generally have the best, and French civil law countries the worst, legal protections of investors.
Abstract: This paper examines legal rules covering protection of corporate shareholders and creditors, the origin of these rules, and the quality of their enforcement in 49 countries. The results show that common law countries generally have the best, and French civil law countries the worst, legal protections of investors, with German and Scandinavian civil law countries located in the middle. We also find that concentration of ownership of shares in the largest public companies is negatively related to investor protections, consistent with the hypothesis that small, diversified shareholders are unlikely to be important in countries that fail to protect their rights.
14,563 citations
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TL;DR: The authors surveys research on corporate governance, with special attention to the importance of legal protection of investors and of ownership concentration in corporate governance systems around the world, and presents a survey of the literature.
Abstract: This paper surveys research on corporate governance, with special attention to the importance of legal protection of investors and of ownership concentration in corporate governance systems around the world.
13,489 citations
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TL;DR: In a cross-section of countries, evidence on government performance, participation in civic and professional societies, importance of large firms, and the performance of social institutions more generally supports this hypothesis.
Abstract: Several authors suggest that trust is an important determinant of cooperation between strangers in a society, and therefore of performance of social institutions. We argue that trust should be particularly important for the performance of large organizations. In a cross-section of countries, evidence on government performance, participation in civic and professional societies, importance of large firms, and the performance of social institutions more generally supports this hypothesis. Moreover, trust is lower in countries with dominant hierarchical religions, which may have deterred networks of cooperation trust hold up remarkably well on a cross-section of countries.
2,157 citations
TL;DR: In a cross-section of countries, evidence on government performance, participation in civic and professional societies, importance of large firms, and the performance of social institutions more generally supports this hypothesis as discussed by the authors.
Abstract: Several authors suggest that trust is an important determinant of cooperation between strangers in a society, and therefore of performance of social institutions. We argue that trust should be particularly important for the performance of large organizations. In a cross-section of countries, evidence on government performance, participation in civic and professional societies, importance of large firms, and the performance of social institutions more generally supports this hypothesis. Moreover, trust is lower in countries with dominant hierarchical religions, which may have deterred networks of cooperation trust hold up remarkably well on a cross-section of countries.
1,776 citations
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TL;DR: This paper examined legal rules covering protection of corporate shareholders and creditors, the origin of these rules, and the quality of their enforcement in 49 countries and found that common law countries generally have the strongest, and french civil law countries the weakest, legal protections of investors, with German and Scandinavian countries located in the middle.
Abstract: This paper examines legal rules covering protection of corporate shareholders and creditors, the origin of these rules, and the quality of their enforcement in 49 countries. The results show that common†law countries generally have the strongest, and french civil law countries the weakest, legal protections of investors, with German†-and Scandinavian†-civil†law countries located in the middle. We also find that concentration of ownership of shares in the largest public companies is negatively related to investor protections, consistent with the hypothesis that small, diversified share†holders are unlikely to be important in countries that fail to protect their rights.
1,632 citations
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TL;DR: In this paper, the authors developed a model in which the provider can invest in improving the quality of service or reducing the cost of providing a service in order to improve the quality or reduce the cost.
Abstract: When should a government provide a service inhouse and when should it contract out provision? We develop a model in which the provider can invest in improving the quality of service or reducing cost. If contracts are incomplete, the private provider has a stronger incentive to engage in both quality improvement and cost reduction than a government employee. However, the private contractor's incentive to engage in cost reduction is typically too strong because he ignores the adverse effect on non-contractible quality. The model is applied to understanding the costs and benefits of prison privatization.
1,382 citations
TL;DR: For example, the authors showed that privatization of public enterprises can raise the cost to politicians of influencing them, since subsidies to private firms necessary to force them to remain inefficient are politically harder to sustain than wasted profits of the state firms.
Abstract: Public enterprises around the world have proved to be highly inefficient, primarily because they pursue strategies, such as excess employment, that satisfy the political objectives of politicians who control them. Privatization of public enterprises can raise the cost to politicians of influencing them, since subsidies to private firms necessary to force them to remain inefficient are politically harder to sustain than wasted profits of the state firms. In this way, privatization leads to efficient restructuring of firms. Moreover, privatization is more effective when combined with a tight monetary policy and when the new owners of firms are profit maximizing investors, rather than their employees or even managers. Copyright 1996 by Royal Economic Society.
1,201 citations
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TL;DR: In this article, a survey of 105 shop owners in Moscow and Warsaw showed that the reliance on private protection, as well as the burden of regulation and corruption, are much greater in Moscow than in Warsaw.
Abstract: Evidence from a survey of 105 shop-owners in Moscow and Warsaw shows that the reliance on private protection, as well as the burden of regulation and corruption, are much greater in Moscow. The evidence suggests that the `invisible hand' model of government better fits the Warsaw local government, and the`grabbing hand' model is more appropriate for Moscow. The evidence implies that the singular focus on the speed of economic reforms to understand the success of transition is misplaced, and that the quality of government may be as essential.
731 citations
TL;DR: In this article, a survey of 452 Russian shops, most of which were privatized between 1992 and 1993, is used to measure the importance of alternative channels through which privatization promotes restructuring.
Abstract: We use a survey of 452 Russian shops, most of which were privatized between 1992 and 1993, to measure the importance of alternative channels through which privatization promotes restructuring. Restructuring is measured as major renovation, a change in suppliers, an increase in hours stores stay open, and layoffs. There is strong evidence that the presence of new owners and new managers raises the likelihood of restructuring. In contrast, there is no evidence that equity incentives of old managers promote restructuring. The evidence points to the critical role new human capital plays in economic transformation.
378 citations
TL;DR: In this article, the authors describe some characteristics of a dysfunctional legal system, and then propose some reforms of the legal rules that would encourage private agents to rely on the legal system rather than mafia to structure their transactions.
Posted Content•
TL;DR: In this article, the authors developed a model in which the provider can invest in improving the quality of service or reducing the cost of providing a service in order to improve the quality or reduce the cost.
Abstract: When should a government provide a service inhouse and when should it contract out provision? We develop a model in which the provider can invest in improving the quality of service or reducing cost. If contracts are incomplete, the private provider has a stronger incentive to engage in both quality improvement and cost reduction than a government employee. However, the private contractor's incentive to engage in cost reduction is typically too strong because he ignores the adverse effect on non-contractible quality. The model is applied to understanding the costs and benefits of prison privatization.
TL;DR: In this article, the authors illustrate this point using the example of pre-privatization restructuring of state firms, and discuss its implications for foreign economic assistance, showing that the more appropriate model, that of a badly divided government, often leads to very different policy recommendations.
Posted Content•
TL;DR: In a cross-section of countries, evidence on government performance, participation in civic and professional societies, importance of large firms, and the performance of social institutions more generally supports this hypothesis as mentioned in this paper.
Abstract: Several authors suggest that trust is an important determinant of cooperation between strangers in a society, and therefore of performance of social institutions. We argue that trust should be particularly important for the performance of large organizations. In a cross-section of countries, evidence on government performance, participation in civic and professional societies, importance of large firms, and the performance of social institutions more generally supports this hypothesis. Moreover, trust is lower in countries with dominant hierarchical religions, which may have deterred networks of cooperation trust hold up remarkably well on a cross-section of countries.
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TL;DR: The authors argue that the lack of turnover of old communist politicians, and the creation of inappropriate electoral and fiscal incentives for these politicians, may account for the poor performance of the Russian government, and suggest some strategies for improving the situation.
Abstract: The speed of economic reforms is not the only important determinant of the success of the transition to a market economy: the transition of government from a communist state to an institution supporting a market economy is as critical. Survey evidence shows that Russia lags significantly behind Poland in the transition of its government, which may account for its inferior economic performance despite adopting similar economic reforms. I argue that the lack of turnover of old communist politicians, and the creation of inappropriate electoral and fiscal incentives for these politicians, may account for the poor performance of the Russian government, and suggest some strategies for improving the situation.
Journal Article•
Posted Content•
TL;DR: In this article, a survey of 105 shop owners in Moscow and Warsaw showed that the reliance on private protection, as well as the burden of regulation and corruption, are much greater in Moscow than in Warsaw.
Abstract: Evidence from a survey of 105 shop-owners in Moscow and Warsaw shows that the reliance on private protection, as well as the burden of regulation and corruption, are much greater in Moscow. The evidence suggests that the `invisible hand' model of government better fits the Warsaw local government, and the`grabbing hand' model is more appropriate for Moscow. The evidence implies that the singular focus on the speed of economic reforms to understand the success of transition is misplaced, and that the quality of government may be as essential.