Does Privatization Raise Productivity? Evidence from Comprehensive Panel Data on Manufacturing Firms in Hungary, Romania, Russia, and Ukraine

J. David Brown, John Earle and Almos Telegdy

No 410, CERT Discussion Papers from Centre for Economic Reform and Transformation, Heriot Watt University

Abstract: We analyze the impact of privatization on multifactor productivity (MFP) using long panel data for nearly the universe of initially state-owned manufacturing firms in four economies. Controlling for firm and industry-year fixed effects and employing a wide variety of measurement approaches, we estimate that majority privatization raises MFP about 28% in Romania, 22% in Hungary, and 3% in Ukraine, with some variation across specifications, while in Russia it lowers it about 4%. Privatization to foreign rather than domestic investors has a larger impact (about 44%) and is much more consistent across countries. The positive effects emerge within a year in Hungary, Romania, and Ukraine and continue to grow thereafter, but are still ambiguous even after 5 years in Russia. Pre-privatization MFP exceeds that of firms remaining state-owned in all countries, implying that cross-sectional estimates overstate privatization effects. The patterns of the estimated effects cast doubt on a number of explanations for "when privatization works."

Keywords: Eastern Europe; privatization; productivity; transition (search for similar items in EconPapers)
JEL-codes: D24 G34 P31 (search for similar items in EconPapers)
Date: 2004
New Economics Papers: this item is included in nep-cis, nep-eec and nep-tra
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Citations: View citations in EconPapers (20)

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Working Paper: Does Privatization Raise Productivity? Evidence from Comprehensive Panel Data on Manufacturing Firms in Hungary, Romania, Russia and Ukraine (2004)
Working Paper: Does Privatization Raise Productivity? Evidence from Comprehensive Panel Data on Manufacturing Firms in Hungary, Romania, Russia, and Ukraine (2004)
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