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

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Author Info
J. David Brown
John S. Earle
Almos Telegdy

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Abstract

This paper estimates the effect of privatization on multifactor productivity using comprehensive panel data on initially state-owned manufacturing firms in four economies. We exploit the data's longitudinal dimension to control for preprivatization selection and estimate long-run impacts. The estimates are robust to functional form but sensitive to selection controls. Our preferred random growth estimates imply positive multifactor productivity effects of 15 percent in Romania, 8 percent in Hungary, and 2 percent in Ukraine, but a -3 percent effect in Russia. The foreign privatization effect is larger (18–35 percent) in all countries. Positive domestic effects appear immediately in Hungary, Romania, and Ukraine and continue growing thereafter, but emerge only five years after privatization in Russia.

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Publisher Info
Article provided by University of Chicago Press in its journal Journal of Political Economy.

Volume (Year): 114 (2006)
Issue (Month): 1 (February)
Pages: 61-99
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Handle: RePEc:ucp:jpolec:v:114:y:2006:i:1:p:61-99

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  2. 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, MIT Press, vol. 114(4), pages 1153-1191, November. [Downloadable!] (restricted)
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  4. Roland, Gerard & Sekkat, Khalid, 2000. "Managerial career concerns, privatization and restructuring in transition economies," European Economic Review, Elsevier, vol. 44(10), pages 1857-1872, December. [Downloadable!] (restricted)
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  5. Djankov, Simeon & Murrell, Peter, 2002. "Enterprise Restructuring in Transition: A Quantitative Survey," CEPR Discussion Papers 3319, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  6. Jacobson, Louis S & LaLonde, Robert J & Sullivan, Daniel G, 1993. "Earnings Losses of Displaced Workers," American Economic Review, American Economic Association, vol. 83(4), pages 685-709, September. [Downloadable!] (restricted)
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  7. John S. Earle & Csaba Kucsera & Almos Telegdy, 2003. "Ownership Concentration and Corporate Performance on the Budapest Stock Exchange: Do Too Many Cooks Spoil the Goulash?," Staff Working Papers 03-93, W.E. Upjohn Institute for Employment Research. [Downloadable!] (restricted)
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  8. Heckman, James J. & Lalonde, Robert J. & Smith, Jeffrey A., 1999. "The economics and econometrics of active labor market programs," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 31, pages 1865-2097 Elsevier. [Downloadable!] (restricted)
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  11. 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. [Downloadable!] (restricted)
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  12. Arellano, M, 1987. "Computing Robust Standard Errors for Within-Groups Estimators," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 49(4), pages 431-34, November.
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  14. Boycko, Maxim & Shleifer, Andrei & Vishny, Robert W., 1994. "Voucher privatization," Journal of Financial Economics, Elsevier, vol. 35(2), pages 249-266, April. [Downloadable!] (restricted)
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  15. J. David Brown & John Earle & Almos Telegdy, 2004. "Does Privatization Raise Productivity? Evidence from Comprehensive Panel Data on Manufacturing Firms in Hungary, Romania, Russia, and Ukraine," CERT Discussion Papers 0410, Centre for Economic Reform and Transformation, Heriot Watt University. [Downloadable!]
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  16. William L. Megginson & Jeffry M. Netter, 2001. "From State to Market: A Survey of Empirical Studies on Privatization," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 321-389, June. [Downloadable!] (restricted)
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  19. Aghion, Philippe & Blanchard, Olivier & Burgess, Robin, 1994. "The behaviour of state firms in eastern Europe, pre-privatisation," European Economic Review, Elsevier, vol. 38(6), pages 1327-1349, June. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. John S. Earle & Almos Telegdy, 2007. "Ownership and Wages: Estimating Public-Private and Foreign-Domestic Differentials with LEED from Hungary, 1986–2003," Staff Working Papers 07-134, W.E. Upjohn Institute for Employment Research. [Downloadable!] (restricted)
  2. Brown, J. David & Earle, John S. & Telegdy, Álmos, 2008. "Employment and Wage Effects of Privatization: Evidence from Hungary, Romania, Russia, and Ukraine," IZA Discussion Papers 3688, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  3. J. David Brown & John S. Earle & Scott Gehlbach, 2008. "Helping Hand or Grabbing Hand? State Bureaucracy and Privatization Effectiveness," Staff Working Papers 08-142, W.E. Upjohn Institute for Employment Research. [Downloadable!] (restricted)
    Other versions:
  4. Yakovlev, Andrei, 2009. "State-business relations and improvement of corporate governance in Russia," BOFIT Discussion Papers 26/2008, Bank of Finland, Institute for Economies in Transition. [Downloadable!]
  5. John S. Earle & Ãlmos Telegdy, 2007. "Ownership and Wages: Estimating Public-Private and Foreign-Domestic Differentials using LEED from Hungary, 1986-2003," NBER Working Papers 12997, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  6. Csengödi, Sándor / Urban, Dieter M., 2008. "Foreign Takeovers and Wage Dispersion in Hungary," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  7. J. David Brown & John Earle & Almos Telegdy, 2005. "Does Privatization Hurt Workers? Lessons from Comprehensive Manufacturing Firm Panel Data in Hungary, Romania, Russia, and Ukraine," CERT Discussion Papers 0509, Centre for Economic Reform and Transformation, Heriot Watt University. [Downloadable!]
    Other versions:
  8. Gábor Békés & Jörn Kleinert & Farid Toubal, 2006. "Spillovers from Multinationals to Heterogeneous Domestic Firms: Evidence from Hungary," CeFiG Working Papers 1, Center for Firms in the Global Economy, revised 01 Dec 2006. [Downloadable!]
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  9. Vera Brusentsev & Wayne Vroman, 2008. "Unemployment And Unemployment Protection In Transition Economies," Working Papers 08-15, University of Delaware, Department of Economics. [Downloadable!]
  10. Gábor Kátay & Zoltán Wolf, 2008. "Driving Factors of Growth in Hungary - a Decomposition Exercise," MNB Working Papers 2008/6, Magyar Nemzeti Bank (The Central Bank of Hungary). [Downloadable!]
  11. Gorodnichenko, Yuriy & Grygorenko, Yegor, 2008. "Are Oligarchs Productive? Theory and Evidence," IZA Discussion Papers 3282, Institute for the Study of Labor (IZA). [Downloadable!]
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  12. Boeri, Tito & Macis, Mario, 2008. "Do Unemployment Benefits Promote or Hinder Structural Change?," IZA Discussion Papers 3371, Institute for the Study of Labor (IZA). [Downloadable!]
  13. De Fraja, Gianni & Roberts, Barbara M, 2007. "Privatisation in Poland: What Was the Government Trying to Achieve?," CEPR Discussion Papers 6114, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  14. Correa, Paulo G. & Fernandes, Ana M. & Uregian, Chris J., 2008. "Technology adoption and the investment climate : firm-level evidence for Eastern Europe and Central Asia," Policy Research Working Paper Series 4707, The World Bank. [Downloadable!]
  15. J. David Brown & John S. Earle & Vladimir Vakhitov, 2006. "Wages, Layoffs, and Privatization: Evidence from Ukraine," Staff Working Papers 06-126, W.E. Upjohn Institute for Employment Research. [Downloadable!] (restricted)
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  16. J. David Brown & John S. Earle, 2007. "The Productivity Effects of Privatization in Ukraine: Estimates from Comprehensive Manufacturing Firm Panel Data, 1989–2005," Staff Working Papers 07-137, W.E. Upjohn Institute for Employment Research. [Downloadable!] (restricted)
  17. Sándor Csengödi & Rolf Jungnickel & Dieter M. Urban, 2008. "Foreign Takeovers and Wages in Hungary," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 144(1), pages 55-82, April. [Downloadable!] (restricted)
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