Despite more than a decade of privatization, state-owned enterprises account for nearly as large a share of developing countries' economies today as twenty years ago. Often inefficient government firms and the resulting deficits hinder growth, making it harder for people to escape poverty. Drawing on extensive data and detailed case studies, this report shows students how divestiture and other reforms can improve the economy, and why politics often impedes reform. It also focuses on how successfully reformed countries have overcome such obstacles. The authors analyze three types of company contracts: performance contracts between a government and a public manager, management contracts between a government and the private manager of a government firm, and regulatory contracts between a government and a privatized, regulated monopoly. The authors then study the reasons why so few countries have reformed, and conclude with a final chapter that draws on these findings to present detailed guidance on how to reform state-owned enterprises successfully.