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Structural change and misallocation: Firm‐level evidence from Poland

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  • Jan Hagemejer
  • Joanna Tyrowicz

Abstract

Early transition literature linked a large number of firm failures with the inability to overcome the pre‐transition misallocation of resources, that is, the inadequate capital–labour ratio. We look at the link between misallocation and firm survival using a rich firm‐level dataset of over 1,600 manufacturing plants established in a centrally planned economy after 1945. Our duration models include the standard Olley–Pakes misallocation measures as well as a firm‐level measure of the counterfactual level of capital that takes into account the present‐day market allocation and productivity. We show that while privatization is positively related to firm survival, misallocation (a) was more of a firm‐level than sector‐level phenomenon and, more importantly, (b) it, in general, did not have a sizeable effect on the actual firm survival nor it had an impact on the outcome of privatization.

Suggested Citation

  • Jan Hagemejer & Joanna Tyrowicz, 2021. "Structural change and misallocation: Firm‐level evidence from Poland," Economics of Transition and Institutional Change, John Wiley & Sons, vol. 29(1), pages 95-122, January.
  • Handle: RePEc:wly:ectrin:v:29:y:2021:i:1:p:95-122
    DOI: 10.1111/ecot.12260
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    More about this item

    JEL classification:

    • P31 - Economic Systems - - Socialist Institutions and Their Transitions - - - Socialist Enterprises and Their Transitions
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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