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

Posted: 7 Feb 2006

See all articles by J. David Brown

J. David Brown

US Census Bureau Center for Economic Studies; IZA Institute of Labor Economics

John S. Earle

George Mason University - Schar School of Policy and Government; IZA Institute of Labor Economics

Almos Telegdy

Corvinus University of Budapest; Magyar Nemzeti Bank

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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 only emerge five years after privatization in Russia.

Keywords: privatization, productivity, foreign ownership, random growth model, transition, Hungary, Romania, Russia, Ukraine

JEL Classification: D24, G34, L33, P31

Suggested Citation

Brown, J. David and Earle, John S. and Telegdy, Almos, The Productivity Effects of Privatization: Longitudinal Estimates from Hungary, Romania, Russia, and Ukraine. Journal of Political Economy, Vol. 114, pp. 61-99, February 2006, Available at SSRN: https://ssrn.com/abstract=881045

J. David Brown

US Census Bureau Center for Economic Studies ( email )

4600 Silver Hill Road
Washington, DC 20233
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301-763-8769 (Phone)
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IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

John S. Earle (Contact Author)

George Mason University - Schar School of Policy and Government ( email )

3351 Fairfax Drive
MS 3B1
Arlington, VA 22201
United States
703-993-8023 (Phone)

HOME PAGE: http://earle.gmu.edu

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Almos Telegdy

Corvinus University of Budapest ( email )

Hungary

Magyar Nemzeti Bank ( email )

Szabadsag ter 8-9
Budapest, H-1850
Hungary

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