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Leviathan Resists: The Endogenous Relationship Between Privatisation and Firm Performance

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Abstract

Using a unique panel data set of privatised cement firms in Turkey, we test the hypothesis that privatisation and firm performance are determined simultaneously in a political economy context. By focusing on the short- and medium-run joint relationship between privatisation and firm performance, we find that: i) private sector increases the output in the medium-run, but by changing the scale property of production from increasing returns-to-scale to decreasing returnsto- scale, ii) the only factor that increases the labour productivity in the short run is a decrease in labour stock, iii) the negative impact of labour growth on productivity is less severe during the privatised period, and iv) the likelihood of the privatisation of firms decreases if the number of workers employed in firms is high, if they exhibit favourable short-run performance, if the voter preference is less fractionalised and the government representation is weak in the provinces that they are located, and if they are based in socio-economically less developed regions.

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Bibliographic Info

Paper provided by Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance in its series Economics Series with number 2005_17.

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Length: 41 pages
Date of creation: 17 Oct 2005
Date of revision:
Handle: RePEc:dkn:econwp:eco_2005_17

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Keywords: Privatisation; Firm Performance; Simultaneous Equations;

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References

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  1. Heckman, James J, 1978. "Dummy Endogenous Variables in a Simultaneous Equation System," Econometrica, Econometric Society, Econometric Society, vol. 46(4), pages 931-59, July.
  2. Earle, John S. & Telegdy, Almos, 2002. "Privatization Methods and Productivity Effects in Romanian Industrial Enterprises," Journal of Comparative Economics, Elsevier, vol. 30(4), pages 657-682, December.
  3. Gylfason, Thorvaldur, 1998. "Privatization, Efficiency and Economic Growth," CEPR Discussion Papers 1844, C.E.P.R. Discussion Papers.
  4. Roman Frydman & Cheryl Gray & Marek Hessel & Andrzej Rapaczynski, 1999. "When Does Privatization Work? The Impact Of Private Ownership On Corporate Performance In The Transition Economies," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 114(4), pages 1153-1191, November.
  5. Vining, Aidan R & Boardman, Anthony E, 1992. " Ownership versus Competition: Efficiency in Public Enterprise," Public Choice, Springer, vol. 73(2), pages 205-39, March.
  6. Boardman, Anthony E & Vining, Aidan R, 1989. "Ownership and Performance in Competitive Environments: A Comparison of the Performance of Private, Mixed, and State-Owned Enterprises," Journal of Law and Economics, University of Chicago Press, vol. 32(1), pages 1-33, April.
  7. Loren Brandt & Hongbin Li & Joanne Roberts, 2005. "Banks and Enterprise Privatization in China," Journal of Law, Economics and Organization, Oxford University Press, Oxford University Press, vol. 21(2), pages 524-546, October.
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  13. Sebastian Galiani & Paul Gertler & Ernesto Schargrodsky, 2002. "Water for Life: The Impact of the Privatization of Water Services on Child Mortality," Working Papers 54, Universidad de San Andres, Departamento de Economia, revised Sep 2005.
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  15. Shirley, Mary & Walsh, Patrick, 2000. "Public versus private ownership : the current state of the debate," Policy Research Working Paper Series 2420, The World Bank.
  16. J. A. Hausman, 1976. "Specification Tests in Econometrics," Working papers 185, Massachusetts Institute of Technology (MIT), Department of Economics.
  17. Alesina, Alberto, et al, 1996. " Political Instability and Economic Growth," Journal of Economic Growth, Springer, vol. 1(2), pages 189-211, June.
  18. Patrick Plane, 1997. "Privatization and economic growth: an empirical investigation from a sample of developing market economies," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 29(2), pages 161-178.
  19. Nandini Gupta, 2005. "Partial Privatization and Firm Performance," Journal of Finance, American Finance Association, vol. 60(2), pages 987-1015, 04.
  20. Randall S. Kroszner & Philip E. Strahan, 1999. "What Drives Deregulation? Economics And Politics Of The Relaxation Of Bank Branching Restrictions," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 114(4), pages 1437-1467, November.
  21. Clarke, George R G & Cull, Robert, 2002. "Political and Economic Determinants of the Likelihood of Privatizing Argentine Public Banks," Journal of Law and Economics, University of Chicago Press, vol. 45(1), pages 165-97, April.
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Cited by:
  1. Christian Bj�rnskov & Niklas Potrafke, 2012. "Political Ideology and Economic Freedom Across Canadian Provinces," Eastern Economic Journal, Palgrave Macmillan, vol. 38(2), pages 143-166.
  2. Potrafke, Niklas, 2010. "Labor market deregulation and globalization: Empirical evidence from OECD countries," Munich Reprints in Economics, University of Munich, Department of Economics 19282, University of Munich, Department of Economics.
  3. World Bank, 2013. "Republic of Turkey Reform for Competitiveness Technical Assistance : Fostering Open and Efficient Markets through Effective Competition Policies," World Bank Other Operational Studies 17010, The World Bank.
  4. Potrafke, Niklas, 2010. "Does government ideology influence deregulation of product markets? Empirical evidence from OECD countries," Munich Reprints in Economics, University of Munich, Department of Economics 19284, University of Munich, Department of Economics.
  5. Filippo Belloc & Antonio Nicita, 2011. "Liberalization-Privatization Paths: Policies and Politics," Department of Economics University of Siena 609, Department of Economics, University of Siena.
  6. Filippo Belloc & Antonio Nicita, 2011. "The political determinants of liberalization: do ideological cleavages still matter?," International Review of Economics, Springer, vol. 58(2), pages 121-145, June.
  7. Filippo Belloc & Antonio Nicita, 2010. "Partisan Liberalizations. A New Puzzle from OECD Network Industries?," Department of Economics University of Siena 588, Department of Economics, University of Siena.

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