The Politics of Russian Enterprise Reform: Insiders, Local Governments, and the Obstacles to Restructuring

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Abstract
Russia and other countries in the Commonwealth of Independent States that have implemented voucher privatization programs have to account for the puzzling behavior of insiders—manager‐owners—who, in stripping assets from the firms they own, appear to be stealing from one pocket to fill the other. This article suggests that asset stripping and the absence of restructuring result from interactions between insiders and subnational governments in a particular property rights regime, in which the ability to realize value is limited by uncertainty and illiquidity. As the central institutions that govern the Russian economy have ceded their powers to the provinces, regional and local governments have imposed a variety of distortions on enterprises to protect local employment.

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