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

W.E. Upjohn Institute Staff Working Paper No. 04-107

52 Pages Posted: 29 Dec 2004  

J. David Brown

US Census Bureau Center for Economic Studies; IZA Institute of Labor Economics

John S. Earle

George Mason University - Schar School of Policy and Government; IZA Institute of Labor Economics

Almos Telegdy

Hungarian Academy of Sciences (HAS) - Research Centre for Economic and Regional Studies (HAS); Central European University

Multiple version iconThere are 2 versions of this paper

Date Written: November 2004

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

JEL Classification: D24, G34, L33, P31

Suggested Citation

Brown, J. David and Earle, John S. and Telegdy, Almos, Does Privatization Raise Productivity? Evidence from Comprehensive Panel Data on Manufacturing Firms in Hungary, Romania, Russia, and Ukraine (November 2004). W.E. Upjohn Institute Staff Working Paper No. 04-107. Available at SSRN: https://ssrn.com/abstract=634081 or http://dx.doi.org/10.2139/ssrn.634081

J. David Brown

US Census Bureau Center for Economic Studies ( email )

4600 Silver Hill Road
Washington, DC 20233
United States
301-763-8769 (Phone)
301-763-5935 (Fax)

IZA Institute of Labor Economics

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

John S. Earle (Contact Author)

George Mason University - Schar School of Policy and Government ( email )

3351 Fairfax Drive
MS 3B1
Arlington, VA 22201
United States
703-993-8023 (Phone)

HOME PAGE: http://earle.gmu.edu

IZA Institute of Labor Economics

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

Almos Telegdy

Hungarian Academy of Sciences (HAS) - Research Centre for Economic and Regional Studies (HAS) ( email )

7621 Pécs, Papnovelde u. 22
Budapest, H-1112
Hungary

Central European University ( email )

Nador utca 9
Budapest, H-1051
Hungary
+36 1 327 3233 (Phone)
+36 1 327 3232 (Fax)

Paper statistics

Downloads
1,090
Rank
14,194
Abstract Views
14,831