Competition and privatization amidst weak institutions: Evidence from Mongolia

Mongolia's mass privatization program was implanted in a country that lacke d the very basic institutions of capitalism. This paper examines the effect s of competition and ownership On the efficiency of the newly privatized en terprises, using a representative sample of enterprises and controlling for possible selection biases. Competition has quantitatively large effects; p erfectly competitive firms having nearly double the efficiency of monopolie s. Enterprises with residual state ownership appear to be more efficient th an other enterprises, reflecting an environment where the government was pr essured to focus on efficiency and institutions gave little voice to outsid er owners. (JEL PO, L1, L33, O12).