An Assessment of the Economic Reform in Poland's State-Owned Industry

This Note assesses the economic reform in Polish state-owned industry begun in 1982. It describes the system and traces out how the competing policy goals of the Polish government have served to generate a plethora of contradictory regulations that have greatly reduced the potential effectiveness of the reform. Using survey data from interviews with Polish managers, the Note finds that administrative constraints on the procurement of inputs, coupled with a distorted price and incentive system, not the psychological attitude of enterprise managers, have limited economic efficiency. Data on investment, employment, and productivity show that resource flows have been the reverse of what one would expect based on enterprise profitability, indicating that administrative decisions, not markets, continue to determine the allocation of goods and services in Poland.