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 04-107, Upjohn Working Papers from W.E. Upjohn Institute for Employment Research

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 percent in Romania, 22 percent in Hungary, and 3 percent in Ukraine, with some variation across specifications, while in Russia it lowers it about 4 percent. Privatization to foreign rather than domestic investors has a larger impact (about 44 percent) 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: privatization; productivity; foreign ownership; Hungary; Romania; Russia; Ukraine; transition (search for similar items in EconPapers)
JEL-codes: D24 G34 L33 P31 (search for similar items in EconPapers)
Date: 2004-11
New Economics Papers: this item is included in nep-cis, nep-fin and nep-tra
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Citations: View citations in EconPapers (17)

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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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