Effects of Privatization and Ownership in Transition Economies

51 Pages Posted: 20 Apr 2016

See all articles by Saul Estrin

Saul Estrin

Centre for Economic Policy Research (CEPR); London School of Economics & Political Science (LSE); IZA Institute of Labor Economics

Jan Hanousek

CERGE-EI (Center for Economic Research and Graduate Education - Economics Institute); Charles University in Prague; Academy of Sciences of the Czech Republic; Centre for Economic Policy Research (CEPR)

Evžen Kočenda

Charles University in Prague - Institute of Economic Studies; Institute of Information Theory and Automation (Czech Academy of Sciences) - Department of Econometrics; CESifo; University of Regensburg - Institute for East and Southeast European Studies; University of Michigan at Ann Arbor - The William Davidson Institute

Jan Svejnar

School of International and Public Affairs, Columbia University, NY, USA; CEPR; IZA; CERGE-EI; University of Ljubljana

Date Written: January 1, 2009

Abstract

The paper evaluates the effects of privatization in the post-communist economies and China. In post-communist economies privatization to foreign owners results in arapid improvement in performance of firms, while performance effects of privatization to domestic owners are less impressive and vary across regions, coinciding with differences in policies and institutional development. In China relatively more estimates suggest that privatization to domestic owners improves the level of performance. Concentrated private ownership has a stronger positive effect on performance than dispersed ownership in the post-communist economies, but foreign joint ventures rather than wholly owned foreign firms have a positive effect in China. Worker or collective ownership does not have a negative effect. In the post-communist economies new firms are equally or more efficient than firms privatized to domestic owners, and foreign start-ups are more efficient than domestic ones. Privatization is not associated with lower employment. When accompanied by complementary reforms, privatization has a positive effect on economic growth. Three factors appear to drive the more positive effect of privatization to foreign than domestic owners. Domestic managers have more limited skills and access to world markets, domestically privatized firms have been more subject to tunneling and in some countries new large shareholders artificially decreased performance. The important policy implication is that privatization per se does not guarantee improved performance, at least not in the short- to medium-run. Type of private ownership, corporate governance, access to know-how and markets, and the legal and institutional system matter for firm performance.

Keywords: Economic Systems, Bankruptcy and Resolution of Financial Distress, Banks & Banking Reform, Financial Crisis Management & Restructuring, Privatization

Suggested Citation

Estrin, Saul and Estrin, Saul and Hanousek, Jan and Kocenda, Evzen and Svejnar, Jan, Effects of Privatization and Ownership in Transition Economies (January 1, 2009). World Bank Policy Research Working Paper No. 4811, Available at SSRN: https://ssrn.com/abstract=1327280

Saul Estrin (Contact Author)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London, WC2A 2AE
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IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Jan Hanousek

CERGE-EI (Center for Economic Research and Graduate Education - Economics Institute) ( email )

Politickych veznu 7
Prague 1, 111 21
Czech Republic
420 2 2400 5119 (Phone)
420 2 2421 1374 (Fax)

HOME PAGE: http://www.cerge-ei.cz

Charles University in Prague ( email )

Celetná 13
Praha 1, 116 36
Czech Republic

Academy of Sciences of the Czech Republic ( email )

Narodni 3, 111 42
Praha 1, 117 20
Czech Republic

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Evzen Kocenda

Charles University in Prague - Institute of Economic Studies ( email )

Opletalova St. 26
Prague, 11000
Czech Republic

HOME PAGE: http://kocenda.fsv.cuni.cz

Institute of Information Theory and Automation (Czech Academy of Sciences) - Department of Econometrics ( email )

Pod vodarenskou vezi 4
CZ-18208 Praha 8
Czech Republic

CESifo

Poschinger Str. 5
Munich, DE-81679
Germany

University of Regensburg - Institute for East and Southeast European Studies

Landshuterstr. 4
Regensburg, 93047
Germany

University of Michigan at Ann Arbor - The William Davidson Institute

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Wyly Hall
Ann Arbor, MI 48109-1234
United States

Jan Svejnar

School of International and Public Affairs, Columbia University, NY, USA ( email )

420 West 118th Street
New York, NY 10027
United States

CEPR

London
United Kingdom

IZA

P.O. Box 7240
Bonn, D-53072
Germany

CERGE-EI

P.O. Box 882
7 Politickych veznu
111 21 Prague 1, Prague
Czech Republic

HOME PAGE: http://www.cerge-ei.cz

University of Ljubljana ( email )

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Ljubljana, 1000
Slovenia

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