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Leviathan resists: the endogenous relationship between privatization and firm performance

  • K. Arin

    ()

  • Mehmet Ulubaşoğlu

    ()

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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File URL: http://hdl.handle.net/10.1007/s11127-009-9418-y
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Article provided by Springer in its journal Public Choice.

Volume (Year): 140 (2009)
Issue (Month): 1 (July)
Pages: 185-204

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Handle: RePEc:kap:pubcho:v:140:y:2009:i:1:p:185-204
DOI: 10.1007/s11127-009-9418-y
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Order Information: Web: http://www.springer.com/economics/public+finance/journal/11127/PS2

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  1. Roubini, Nouriel & Swagel, Phillip & Ozler, Sule & Alesina, Alberto, 1996. "Political Instability and Economic Growth," Scholarly Articles 4553024, Harvard University Department of Economics.
  2. Michael I. Cragg & I. J. Alexander Dyck, 2003. "Privatization and Management Incentives: Evidence from the United Kingdom," Journal of Law, Economics and Organization, Oxford University Press, vol. 19(1), pages 176-217, April.
  3. 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.
  4. 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.
  5. 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.
  6. Rivers, Douglas & Vuong, Quang H., 1988. "Limited information estimators and exogeneity tests for simultaneous probit models," Journal of Econometrics, Elsevier, vol. 39(3), pages 347-366, November.
  7. James J. Heckman, 1977. "Dummy Endogenous Variables in a Simultaneous Equation System," NBER Working Papers 0177, National Bureau of Economic Research, Inc.
  8. Shirley, Mary & Walsh, Patrick, 2000. "Public versus private ownership : the current state of the debate," Policy Research Working Paper Series 2420, The World Bank.
  9. Alesina, Alberto & Özler, Sule & Roubini, Nouriel & Swagel, Phillip, 1996. "Political Instability and Economic Growth," Journal of Economic Growth, Springer, vol. 1(2), pages 189-211, June.
  10. Nandini Gupta, 2005. "Partial Privatization and Firm Performance," Journal of Finance, American Finance Association, vol. 60(2), pages 987-1015, 04.
  11. Vining, Aidan R & Boardman, Anthony E, 1992. "Ownership versus Competition: Efficiency in Public Enterprise," Public Choice, Springer, vol. 73(2), pages 205-39, March.
  12. Niskanen, William A, 1975. "Bureaucrats and Politicians," Journal of Law and Economics, University of Chicago Press, vol. 18(3), pages 617-43, December.
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