| Abstract: |
We study the nature of career concerns of regional leaders in Soviet Russia
under Khrushchev and Brezhnev. We document a substantial over-time variation
in career concerns associated with reforms of Soviet governing hierarchy. We
demonstrate that Khrushchev’s “Sovnarkhoz” system—a unique episode in Soviet
history, when a traditional Soviet unitary-form (U-form) hierarchy was
replaced by a multidivisional-form (M-form) organization—created yardstick
competition in industrial performance of regional leaders. High-powered career
incentives, however, did not result in faster industrial growth on average. We
find that only two groups of regional leaders performed better in response to
increased incentives. 1) Leaders appointed during “Sovnarkhoz” were able to
learn new rules better. 2) Leaders with good connections to their neighbors
were able to overcome negative inter-regional externalities, a common
byproduct of M-form. The lack of success of the “Sovnarkhoz” system triggered
the separation of regional units along production branch lines, which, as we
show, led to a substantial decrease of industrial growth rates. The failure of
Khrushchev's management reforms together with the U-form lobby contributed to
his dismissal and reinstatement of the U-form hierarchy under Brezhnev. |