Productivity Growth and Firm Ownership: An Analytical and Empirical Investigation

34 Pages Posted: 7 Feb 2007

See all articles by Isaac Ehrlich

Isaac Ehrlich

State University of New York at Buffalo - Department of Economics; National Bureau of Economic Research (NBER); University of Chicago - University of Chicago Press; Institute for the Study of Labor (IZA)

Georges Gallais-Hamonno

University of Orleans

Zhiqiang Liu

SUNY at Buffalo, College of Arts & Sciences, Department of Economics

Randall Lutter

Government of the United States of America - FDA

Abstract

We focus on the effect of state versus private ownership on the rates of firm-specific productivity growth and cost decline by developing a model of endogenous, firm-specific productivity growth and testing its implications against panel data on 23 international airlines of varying levels of state ownership over the period 1973-83. Our model and empirical results show that state ownership can lower the long-run annual rate of productivity growth or cost decline, but not necessarily their levels in the short run. Observed level differences in productive efficiency across private and state-owned firms may thus be a function of the age distribution of the firms being compared. These results appear to be independent of whether the firms operate under apparently more or less competitive or regulated markets and whether they differ in production scales. The analysis offers new insights concerning the recent trend oward privatizing state-owned enterprises that has been observed in many countries.

Suggested Citation

Ehrlich, Isaac and Gallais-Hamonno, Georges and Liu, Zhiqiang and Lutter, Randall, Productivity Growth and Firm Ownership: An Analytical and Empirical Investigation. Journal of Political Economy, Vol. 102, No. 5, pp. 1006-1038, October 1994, Available at SSRN: https://ssrn.com/abstract=961463

Isaac Ehrlich (Contact Author)

State University of New York at Buffalo - Department of Economics ( email )

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Georges Gallais-Hamonno

University of Orleans ( email )

Université d'Orléans,
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Zhiqiang Liu

SUNY at Buffalo, College of Arts & Sciences, Department of Economics ( email )

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Randall Lutter

Government of the United States of America - FDA ( email )

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