Off the Rails: Is State Ownership Bad for Productivity?
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Authors
Bogart, Dan
Chaudhary, Latika
Subjects
Nationalization
State Owned Enterprises
India
Railways
Institutions
State Owned Enterprises
India
Railways
Institutions
Advisors
Date of Issue
2015-02
Date
Publisher
Language
Abstract
The performance of Indian railways in the nineteenth century provides a great
context to study the effects of state ownership on productivity and other aspects of
firm operations. We rely on a key feature of the institutional background whereby the
colonial Government of India purchased a majority ownership stake in private railways
at predetermined dates set by contracts negotiated decades before the companies came
under state ownership. Controlling for individual railway fixed effects, year fixed effects,
and railway-specific time trends, we find no evidence of a decline in TFP following
state takeovers of private companies. Instead of reducing productivity, as the recent
experiences with privatization would suggest, we find that the Government of India
maintained productivity when it became the owner of railways. Government ownership
influenced certain areas of operations such as the capital-labor ratio, but not others
such as fares. Our results point to the conditions where state ownership is no worse
than private ownership in terms of productivity.
Type
Article
Description
DRAFT
Series/Report No
Department
Graduate School of Business & Public Policy (GSBPP)
Organization
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NPS Report Number
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Rights
This publication is a work of the U.S. Government as defined in Title 17, United States Code, Section 101. Copyright protection is not available for this work in the United States.