Public sector firms comprise an important proportion of economic activity in many developing countries. Despite this importance however, relatively little is known about which policies or practices optimize SOE outcomes.
Using newly digitized data, I evaluate how an earned autonomy program that decentralized certain decisions to Indian public sector firms affected their performance.
The results indicate that autonomy allows SOEs to increase their capital stock (fixed assets value as well as increased capital works in progress), as well as increase both the number and average value of new capital expansion projects. Firms also increase their sales and profits,y large increases in liabilities relative to assets.
These results indicate that large gains in SOE performance are possible without privatization, by giving well-running SOEs more autonomy over their decisions.
