Advanced Search
MyIDEAS: Login to save this paper or follow this series

Political Selection of Firms into Privatization Programs. Evidence from Romanian Comprehensive Data

Contents:

Author Info

  • Adam Szentpeteri

    ()
    (Central European University, E”tv”s Lor nd University)

  • Almos Telegdy

    ()
    (Institute of Economics - Hungarian Academy of Sciences)

Abstract

Exploiting a unique institutional feature of the early Romanian privatization setup, when a group of firms was explicitly barred from any privatization, we test how politicians select firms into privatization. Using comprehensive data that includes all firms inherited from socialism, we estimate the relation between pre-privatization firm characteristics - the information known to politicians at the time of decision making - and the effect of privatization on employment, efficiency and wages. With the estimated coefficients we simulate the effect of privatization on non-privatizable and privatizable firms separately, including in the latter group both actually privatized and not privatized enterprises. The simulations show that politicians expected privatization to increase the employment of the privatizable group by 7 - 10 percent, and to decrease it in the non-privatizable group by 10 - 30 percent, depending on the first-stage estimation method, OLS or matching combined with OLS. We do not find such discrepancies in the expected change in firm efficiency; the simulated efficiency effect of privatization is large and positive for both groups of firms, and it 52 - 65 percent for non-privatizable, and 41 - 43 percent for the privatizable firms. The analysis does not support the hypothesis that wages played an important role in privatization decisions. Our study suggests that employment concerns played the key role in selecting firms for privatization, even if efficiency gains had to be sacrificed.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://econ.core.hu/file/download/mtdp/MTDP0916.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences in its series IEHAS Discussion Papers with number 0916.

as in new window
Length: 44 pages
Date of creation: Sep 2009
Date of revision:
Handle: RePEc:has:discpr:0916

Contact details of provider:
Postal: 1112 Budapest, Budaorsi ut 45.
Phone: (+36-1) 309-2652
Fax: (36-1) 319-3136
Web page: http://econ.core.hu
More information through EDIRC

Related research

Keywords: Privatization; Government objectives; Firm Efficiency; Employment; Wages; Romania;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Megginson, William L & Nash, Robert C & van Randenborgh, Matthias, 1994. " The Financial and Operating Performance of Newly Privatized Firms: An International Empirical Analysis," Journal of Finance, American Finance Association, vol. 49(2), pages 403-52, June.
  2. Bortolotti, Bernardo & Fantini, Marcella & Siniscalco, Domenico, 2004. "Privatisation around the world: evidence from panel data," Journal of Public Economics, Elsevier, vol. 88(1-2), pages 305-332, January.
  3. Shleifer, Andrei & Vishny, Robert W, 1994. "Politicians and Firms," The Quarterly Journal of Economics, MIT Press, vol. 109(4), pages 995-1025, November.
  4. Schmidt, Klaus M., 1996. "The costs and benefits of privatization: An incomplete contracts approach," Munich Reprints in Economics 19773, University of Munich, Department of Economics.
  5. J. David Brown & John S. Earle & Almos Telegdy, 2006. "The Productivity Effects of Privatization: Longitudinal Estimates from Hungary, Romania, Russia, and Ukraine," Journal of Political Economy, University of Chicago Press, vol. 114(1), pages 61-99, February.
  6. Kay, J A & Thompson, D J, 1986. "Privatisation: A Policy in Search of a Rationale," Economic Journal, Royal Economic Society, vol. 96(381), pages 18-32, March.
  7. Liu, Guy S. & Sun, Pei & Wing Thye Woo, 2007. "What motivates and constrains politicians to privatize? The case of China," Economics Letters, Elsevier, vol. 97(1), pages 81-86, October.
  8. Gérard Roland & Khalid Sekkat, 2000. "Managerial career concerns, privatization and restructuring in transition economies," ULB Institutional Repository 2013/7340, ULB -- Universite Libre de Bruxelles.
  9. John S. Earle & Almos Telegdy, 1998. "The results of 'mass privatization'in Romania: A first empirical study," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 6(2), pages 313-332, November.
  10. Aghion, Philippe & Blanchard, Olivier & Burgess, Robin, 1994. "The behaviour of state firms in eastern Europe, pre-privatisation," European Economic Review, Elsevier, vol. 38(6), pages 1327-1349, June.
  11. Simeon Djankov & Peter Murrell, 2002. "Enterprise Restructuring in Transition: A Quantitative Survey," Journal of Economic Literature, American Economic Association, vol. 40(3), pages 739-792, September.
  12. Andrei Shleifer, 1998. "State Versus Private Ownership," Harvard Institute of Economic Research Working Papers 1841, Harvard - Institute of Economic Research.
  13. Gupta, Nandini & Ham, Jhon C. & Svejnar, Jan, 2008. "Priorities and sequencing in privatization: Evidence from Czech firm panel data," European Economic Review, Elsevier, vol. 52(2), pages 183-208, February.
  14. John S. Earle & Almos Telegdy, 2002. "Privatization Methods and Productivity Effects in Romanian Industrial Enterprises," Upjohn Working Papers and Journal Articles 02-81, W.E. Upjohn Institute for Employment Research.
  15. Gianni De Fraja & Barbara M. Roberts, 2009. "Privatization in Poland," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 17(3), pages 531-557, 07.
  16. 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, vol. 114(4), pages 1153-1191, November.
  17. Jeffry M. Netter & William L. Megginson, 2001. "From State to Market: A Survey of Empirical Studies on Privatization," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 321-389, June.
  18. Kai Guo & Yang Yao, 2005. "Causes of privatization in China," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 13(2), pages 211-238, 04.
  19. Bartel, Ann P. & Harrison, Ann E., 2000. "Ownership versus environment : disentangling the sources of public sector inefficiency," Policy Research Working Paper Series 2272, The World Bank.
  20. Bhaskar, V & Khan, Mushtaq, 1995. "Privatization and Employment: A Study of the Jute Industry in Bangladesh," American Economic Review, American Economic Association, vol. 85(1), pages 267-73, March.
  21. Villalonga, Belen, 2000. "Privatization and efficiency: differentiating ownership effects from political, organizational, and dynamic effects," Journal of Economic Behavior & Organization, Elsevier, vol. 42(1), pages 43-74, May.
  22. Druk-Gal, Bat-Sheva & Yaari, Varda, 2006. "Incumbent employees' resistance to implementing privatization policy," Journal of Economic Behavior & Organization, Elsevier, vol. 59(3), pages 374-405, March.
  23. Schmidt, Klaus M, 1996. "The Costs and Benefits of Privatization: An Incomplete Contracts Approach," Journal of Law, Economics and Organization, Oxford University Press, vol. 12(1), pages 1-24, April.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:has:discpr:0916. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Adrienn Foldi).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.