The Effects of Privatization on Productive Efficiency: Evidence from the Baltic Republics

Type of Work

Article

Date

9-2000

Journal Title

Annals of Public and Cooperative Economics

Journal ISSN

1370-4788

Journal Volume

71

Journal Issue

3

First Page

415

Last Page

439

DOI

10.1111/1467-8292.00147

Abstract

By using new and unusual data sets for large samples of firms in Estonia, Latvia and Lithuania we find that, since privatization, diverse patterns of enterprise ownership have emerged and ownership configurations are quite dynamic. To test competing theories on the productivity effects of alternative ownership structures, identical cross sectional production functions specifications are estimated for each country for varying years during 1993-96. While the effects of private ownership upon productivity are found to vary considerably over time and across countries, productivity effects are always found to be either zero or positive, thus providing partial support for the hypothesis that state ownership is less efficient than private ownership. Findings are mixed concerning hypotheses on the effects of particular ownership structures. Often (e.g. for Lithuania) estimates indicate that all forms of private ownership have zero productivity effects. However, some estimates for Estonia provide support for the mainstream hypothesis that outside (and especially foreign) ownership is preferred to insider ownership. But in other estimates (again for Estonia) majority ownership by employees is found to deliver better business performance than majority ownership by managers (thus refuting the hypothesis that the preferred form of insider ownership is ownership by managers).

Notes

JEL Classification: P31, L33

Hamilton Areas of Study

Economics

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