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When Does Privatization Work? The Impact of Private Ownership on Corporate Performance in the Transition Economies


  • Roman Frydman
  • Cheryl Gray
  • Marek Hessel
  • Andrzej Rapaczynski


This paper compares the performance of privatized and state firms in the transition economies of Central Europe, while controlling for various forms of selection bias. It argues that privatization has different effects depending on the types of owners to whom it gives control. In particular, privatization to outsider, but not insider, owners has significant performance effects. Where privatization is effective, the effect on revenue performance is very pronounced, but there is no comparable effect on cost reduction. Overlooking the strong revenue effect of privatization to outsider owners leads to a substantial overstatement of potential employment losses from postprivatization restructuring.

Suggested Citation

  • 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, Oxford University Press, vol. 114(4), pages 1153-1191.
  • Handle: RePEc:oup:qjecon:v:114:y:1999:i:4:p:1153-1191.

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