12 be evicted by the enterprise because they changed employers and they could hold this housing after they retired from the enterprise. They could even swap apartments with other families. Contract workers were the exception, but even they had the same rights to dispose of housing if they lived in it for 10 years.

45. Whereas the connection between enterpnrse-provided housing and employment in an enterprise became increasingly remote with the passage of time, enterprises were still left with the burden of maintaining the apartments they constructed; a burden they wanted someone else to assume. Interestingly enough, the process of enterprises ridding themselves of their housing responsibilities started before transition: enterprise housing was being transferred to local executive councils in the early 1980's.

46. The view set out above that enterprise-produced housing is not considered to be an asset of the enterprise is supported by Russian practice in privatization. There, enterprises to be privatized are not allowed to include housing, utility networks supporting housing located outside enterprise property, or maintenance activities for these activities in their charter capital.<sup>35</sup> 47. Housing nevertheless remains critical to efficient allocation of resources and growth. It has been estimated, for example, that a quarter of all unemployment in 1992 in Poland was due to limitations on labor mobility caused by lack of housing.<sup>36</sup> Public policy therefore should be concerned with continuity in the supply of housing in the transition to a market economy.

# **Future Governmental Responsibility for and Financing of Divested Services** **_Divested_** _Services:_ **_Whose_** _Responsibility?_

48. Which level of government should assume responsibility for those social functions being divested by enterprises that might continue to be supported by the state? The assumption in most of the literature on enterprise divestiture of "social" assets in the former Soviet Union is that government provision of these services should be undertaken by local governments. The question as to whether this is the appropriate level of government to undertake these functions is seldom if ever raised, and needs to be examined more closely. It is obviously appropriate for local governments to be responsible for local infrastructure such as roads, district heating and water and sewer reticulation. Many of the benefits from these functions are strictly local in effect.

49. Responsibilities for other social services appear to have been assigned to different levels of government in the past on the basis of complexity of the services involved. Thus local governments have been responsible for basic education in the primary schools and for local health clinics, while higher and more specialized levels of education and medical care were responsibilities of the national government. In view of their previous responsibilities, local govermments may be the logical level of government in the transition economies to undertake some social functions being divested by enterprises. For example, kindergartens would seem to be a logical responsibility for local governments, given that they are now responsible for primary school education.

50. While this is a point of view that is not common, however, there are legitimate questions as to whether "people" services such as health or education are appropriate local responsibilities. It is not apparent, for instance, that externalities in health or education which lead to government intervention in provision of these services are primarily local in nature.

- **35** See Mari Kuraishi and Lev Freinkman, "Russia: Enterprise Restructuring and Social Asset Divestiture," Notes for World Bank/lMF/EBRD Meeting, May 31, 1995, p.5; Freinkman and Starodubrovskaya, "Restructuring of Enterprise Social Assets in Russia," p. 9.

- **36** Fabrizio Coricelli, Krysztof Hagemejer and Krysztof Rybinski, "Poland," in Simon Commander and Fabrizio Coricelli (eds), _Unemployment, Restructuring, and the Labor Market in Eastern Europe and Russia,_ EDI Development Studies, Washington, DC., The World Bank, 1995, p. 74.