The Productivity Effects of Privatization: Longitudinal Estimates from Hungary, Romania, Russia, and Ukraine
J. David Brown
US Census Bureau Center for Economic Studies; Institute for the Study of Labor (IZA)
John S. Earle
George Mason University - School of Public Policy; Central European University (CEU) - Department of Economics; Institute for the Study of Labor (IZA)
Hungarian Academy of Sciences (HAS) - Research Centre for Economic and Regional Studies; Central European University
Upjohn Institute Working Paper No. 05-121
This paper estimates the effect of privatization on multifactor productivity (MFP) using long panel data for nearly the universe of initially state-owned manufacturing firms in four economies. We exploit the key longitudinal feature of our data to measure and control for pre-privatization selection bias and to estimate long-run impacts. We find that the magnitudes of our estimates are robust to alternative functional forms, but sensitive to how we control for selection. Our preferred random growth models imply that majority privatization raises MFP about 15% in Romania, 8% in Hungary, and 2% in Ukraine, while in Russia it lowers it 3%. Privatization to foreign rather than domestic investors has a larger impact, 18-35%, in all countries. Positive domestic effects appear within a year in Hungary, Romania, and Ukraine and continue growing thereafter, but take 5 years after privatization to emerge in Russia.
Number of Pages in PDF File: 42
Keywords: privatization, productivity, foreign ownership, random growth model, transition, Hungary, Romania, Russia, Ukraine
JEL Classification: D24, G34, L33, P31working papers series
Date posted: October 27, 2005
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