State or Private Ownership? A Survey of Empirical Studies

This paper focuses on property rights and performance of enterprises. The objective of this paper is to summarize existing knowledge from empirical studies dealing with the question of whether private property and privatization of enterprises encourage firms to increase their performance measured as growth of profitability, labor productivity, investments, costs effectiveness, etc. On the basis of empirical studies, it is also determined what the influence of institutional frameworks of property rights and privatization is on the firm performance. The first part of the paper reviews results of studies on the non-transition economies privatized by 1990. The second one evaluates the impact of private ownership on performance of enterprises from transition economies of Central and Eastern Europe, and the Former Soviet Union. The results of the studies suggest that private ownership is an important but not sufficient determinant of firm prosperity, subsequently resulting in overall rise of wealth of nations. The positive impact of private ownership on economic performance can occur only in an appropriate institutional environment with relevant legal standards (righteous and enforceable contracts, the protection of shareholders and creditors, adequate banking system, functioning bankruptcy courts, capital market supervision, etc.).