J. David Brown (Heriot-Watt University and CEU Labor Project) John S. Earle () (W.E. Upjohn Institute for Employment Research and Central European University) Almos Telegdy (Central European University and Institute of Economics of the Hungarian Academy of Sciences)
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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."
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Paper provided by W.E. Upjohn Institute for Employment Research in its series Staff Working Papers with number
04-107.
Length: Date of creation: Nov 2004 Date of revision: Handle: RePEc:upj:weupjo:04-107
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Find related papers by JEL classification: D24 - Microeconomics - - Production and Organizations - - - Production; Capital and Total Factor Productivity; Capacity G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Boundaries of Public and Private Enterprise; Privatization; Contracting Out P31 - Economic Systems - - Socialist Institutions and Their Transitions - - - Socialist Enterprises and Their Transitions
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