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The Productivity Effects of Privatization: Longitudinal Estimates from Hungary, Romania, Russia, and Ukraine

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  • 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)

Abstract

This paper estimates the effect of privatization on multifactor productivity (MFP) using long panel data for nearly the universe of initially state-owned manufacturing firms in four economies. We exploit the key longitudinal feature of our data to measure and control for pre-privatization selection bias and to estimate long-run impacts. We find that the magnitudes of our estimates are robust to alternative functional forms, but sensitive to how we control for selection. Our preferred random growth models imply that majority privatization raises MFP about 15% in Romania, 8% in Hungary, and 2% in Ukraine, while in Russia it lowers it 3%. Privatization to foreign rather than domestic investors has a larger impact, 18-35%, in all countries. Positive domestic effects appear within a year in Hungary, Romania, and Ukraine and continue growing thereafter, but take 5 years after privatization to emerge in Russia.

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Bibliographic Info

Paper provided by W.E. Upjohn Institute for Employment Research in its series Upjohn Working Papers and Journal Articles with number 05-121.

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Date of creation: Oct 2005
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Handle: RePEc:upj:weupjo:05-121

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Keywords: privatization; productivity; foreign ownership; random growth model; transition; Hungary; Romania; Russia; Ukraine;

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    by nonicoclolasos in Nonicoclolasos on 2007-11-15 20:46:03
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