Privatization Benefits in Eastern Europe

Posted: 24 Apr 2002

See all articles by Stijn Claessens

Stijn Claessens

Bank for International Settlements (BIS)

Simeon Djankov

London School of Economics & Political Science (LSE); Peter G. Peterson Institute for International Economics

Abstract

We document changes in the performance of over 6000 privatized and state-owned manufacturing enterprises in seven Eastern European countries over the initial transition period. We find that privatization is associated with significant increases in sales revenues and labor productivity, and, to a lesser extent, with fewer job losses. The positive effect of privatization is stronger in economic magnitude and statistical significance as the time elapsed since privatization increases. Enterprises privatized for less than 2 years have labor productivity growth similar to that of state-owned enterprises. In contrast, enterprises privatized for 3 or more years significantly outperform state-owned enterprises. The results are robust to the use of alternative econometric specifications (fixed effects, cluster effects, and random effects), and survive in six of the seven individual country samples (the exceptions being Hungary for sales growth and Romania for labor productivity growth).

Keywords: Privatization; Eastern Europe

Suggested Citation

Claessens, Stijn and Djankov, Simeon, Privatization Benefits in Eastern Europe. Journal of Public Economics, Vol. 83, Issue 3, pp. 307-324. Available at SSRN: https://ssrn.com/abstract=308741

Stijn Claessens

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
CH-4002 Basel
Switzerland

Simeon Djankov (Contact Author)

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

Houghton Street
London, WC2A 2AE
United Kingdom

Peter G. Peterson Institute for International Economics ( email )

1750 Massachusetts Avenue, NW
Washington, DC 20036
United States

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