Mass Privatization and the Postcommunist Mortality Crisis

During the transition to capitalism, postcommunist countries have experienced unprecedented mortality crises, although there has been considerable variation within — and between — countries and regions. Much of this variation remains unexplained, although alcohol and psychological stress have been found to be major causes of declining life expectancy. We move beyond this finding by showing that the implementation of neoliberal-inspired rapid large-scale privatization programs (mass privatization) was a major determinant of the decline in life expectancy. We find that mass privatization also increased alcohol-related deaths, heart disease, and suicide rates, strong evidence that mass privatization created psychosocial stress that directly resulted in higher mortality. We also find that mass privatization modestly contributed to a decline in the number of physicians, dentists, and hospital beds per capita; however, we find only very weak evidence that this reduction in health resources directly contributed to the mortality crisis itself. By using “control function” and instrumental variable approaches to account for the potential endogeneity of mass privatization, we also demonstrate that the choice of mass privatization as a property-reform strategy was not economically determined, but was rather caused by ethnic politics and the mimicking of policies adopted by powerful neighboring countries.