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Privatization: What Have We Learned? 1
Sergei Guriev2 and William Megginson3
Abstract
Privatization is one of the major economic phenomena in recent economic history. This paper
summarizes empirical research on the effect of privatization on the performance of privatized
firms and on the society. The extant evidence from privatizations in many developed and
developing shows that privatization usually results in an increased productivity and positive
effects on the society. The effect of privatization depends however on economic institutions in
place, in particular on rule-of-law, competition, hard budget constraints, quality of governance
and regulation. We pay a special attention to the cases of Russia and China and show that their
experience is consistent with the conventional wisdom once one accounts for an appropriate
counterfactual.
1 This paper is prepared for ABCDE conference in St Petersberg, January 2005. The paper draws heavily on
Megginson 2005 and Guriev and Rachinsky 2005.
2 Human Capital Foundation Professor of Corporate Finance, New Economic School and CEFIR, Moscow, and
CEPR. E-mail: [email protected].
3 Professor and Rainbolt Chair in Finance, University of Oklahoma. E-mail: [email protected].
Why Is Privatization Research Important?
Since 1979, many countries have embarked on the course of privatization which has changed the
economic landscape around the world. Privatization has spread to many industries, including
those that had never been privately owned. Privatization has transformed command economies in
post-communist countries into decentralized ones. It has changed the political balance of power
in many societies and revolutionized global financial markets. Yet, the intellectual debate on the
benefits of privatization is far from over. The available research shows that the impact of
privatization on the privatized firms and on the economy and society depends on many variables
including political and economic institutions. There are significant complementarities between
privatization and other reforms. It also matters how privatization is structured and who the new
owners are. In particular, there are substantial benefits to opening up to foreign ownership.
We summarize the extant research on privatization in this article, and also discuss two important
cases that are often referred to as evidence against privatization: Russia and China. In Russia
(and some other CIS countries), privatization seems to have produced few benefits for the
privatized firms or for society, whereas China has managed to pursue a reform package that has
not so far included the mass privatization of state-owned enterprises and yet has produced very
impressive results. We argue that in both cases–as well as in other controversial privatization
examples such as Latin America–the outcomes can be explained within the conventional
framework once one accounts for an appropriate counterfactual.
A comprehensive survey of the existing research on privatization would take over fifty pages (as
it actually does in Megginson and Netter 2001; Djankov and Murrel 2002; and Megginson 2005)
so we only summarize the general lessons and discuss the representative studies.
Privatization Around the World
While it is now hard to imagine the world without privatization, it is still a very recent
phenomenon by historical standards. While there were important privatization programs in West
Germany in the early 1960s, and in Chile during the 1970s, state ownership of business
enterprise was pervasive, and growing, in the world economy until a quarter-century ago. In
OECD countries, this was a result of (1) the Great Depression, which inspired a profound
critique of private ownership, (2) the two World Wars, during which governments established (or
reestablished) public ownership over “strategic” industries, and (3) widespread acceptance of
social democrat philosophies stressing the strategic need for state control of an economy’s
“commanding heights.” In the socialist countries, public ownership of the means of production
was the essential piece of ideology; private ownership was limited to personal consumption
goods and – in some countries – to small agricultural land plots. Not surprisingly, given the
perceived success of Soviet industrialization and the important role of public ownership in the
developed West, many developing countries also adopted state-directed development policies
during the post-WWII era.
By the late 1970s, however, there was growing disappointment with the dismal performance of
the state-owned companies, as well as the growth slowdown in the socialist countries, prompted
the first privatization attempts by Britain’s conservative Thatcher government. Since then,
privatization has spread to more than 100 countries that collectively have privatized tens of
thousands of firms, and have raised almost $1.5 trillion. Privatization has produced substantial
fiscal benefits: in many countries, privatization revenues accounted for 10 percent or more of
government budgets in some years, and saved almost as much via eliminating the need for
further subsidies to the state owned enterprises.
Certainly, the most dramatic privatization experiences have occurred in transition countries
where socialist economies have been become predominantly privately owned within a decade.
Yet, other countries have also pursued impressive privatization programs; moreover, as much of
post-communist privatization was non-cash-based, OECD countries and other developing
countries easily surpassed transition economies in terms of privatization revenues.
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1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
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Figure 1: Developing countries’ revenues from privatization. Source: World Bank Privatization
Database.
Since 1984, the share of state-owned enterprises (SOE) in the GDP of industrialized countries
has fallen by almost half, to less than 5 percent. The change was even more substantial in the
developing countries: according to Sheshinski and Lopez-Calva 1999, between 1980 and 1997,
SOEs’ activities as a percentage of GDP decreased from 11 to 5 percent in middle income
countries, and from 15 to 3 percent in low income economies. The change in employment was
even larger. In the middle-income countries, SOE employment has come down from a peak of 13
to about 2 percent of total employment, while in low income countries employment in state
enterprises has dropped from over 20 to about 9 percent (Sheshinski and Lopez-Calva 1999).
Figure 2: The share of SOE in GDP by region. Source: Lopez-de-Silanes 2005, Figure 1.
The Theoretical Debate on Privatization
The policy debate on privatization is often reduced to the following simple arguments.
Privatization helps to raise revenues for the government. Private ownership strengthens the
incentives for profit maximization and therefore should lead to increased productive and
allocative efficiency. Yet private ownership may involve substantial costs: there can be market
failures related to externalities, market power, and public goods. These market failures provide a
rationale for public ownership.
While the policy debate is usually focused on the trade-offs above, economists argue that the
picture is actually much more nuanced. Privatization, particularly in post-socialist countries,
tends to impact almost all macroeconomic and many microeconomic forces, sometimes in
conflicting ways.
Fiscal considerations. The argument that privatization helps to raise cash for the government is
related to the privatization’s impact on productivity. If the public ownership is optimal, then
government is better off keeping the firms in public ownership and receiving the stream of
profits. If the government is cash-strapped it should issue debt (or raise taxes). The privatization
proceeds are high only when the new private owners are more efficient (or at least expect to be
more efficient). Therefore the fiscal benefits of privatization are certainly related to the
efficiency and welfare advantages of private ownership. Yet, the fiscal issues are very important
as they provide government with incentives to undertake the privatization–to raise cash and to
eliminate public subsidies to SOE.
Privatization and market failures. Market failures, even when they exist, do not have to be
corrected through public ownership. Much can be achieved through regulation, taxation, and
private provision of public goods (through profit-maximizing firms or non-profit organizations).
There are certainly limits to this argument. Similarly to the multitasking framework of
Holmstrom and Milgrom 1991, Shleifer 1998 argues that privatization may result in an excessive
emphasis on profit maximization at the expense of other socially valuable objectives. If the latter
are not contractible, then the multitasking theory suggests that it may be optimal to weaken the
profit maximization incentives. For example, private prisons may be very good at cutting costs
but do not necessarily internalize the well-being of the convicts (Hart et al. 1997). Therefore
state ownership of prisons may be socially optimal even though they would not undertake cost-
reducing measures.
This argument applies to all societal effects of privatization–externalities, distributional
concerns, market power–whenever government’s regulatory capacity is limited. If, for some
reason, government cannot ensure effective regulation of the privatized firms to limit the
negative externalities, privatization may indeed have negative implications for social welfare.
The regulatory failure may arise from either lack of competence or incentives within government
bureaucracy or because of regulatory capture by the regulated firms. As shown in Guriev and
Rachinsky 2005, privatization can create powerful interest groups that have a serious effect on
economic policy choices. In particular, if privatization creates large private monopolies in an
economy with poor institutions, it is very likely that competition policy will never develop.
Faccio 2006 shows that political connections are especially important in countries with less
mature institutions.
On the other hand, public ownership may not resolve all the relevant issues: both in democratic
and in non-democratic regimes politicians are often concerned with issues other than economic
efficiency and social welfare; they may be either driven by political motives or simply corrupt.
Privatization reduces their ability to pursue political objectives.
Market socialism. The opponents of privatization argue that neoclassical economics’ welfare
theorems should also work in an economy with public ownership. Instead of a Soviet-type
economy with public ownership and planning, one can imagine a market socialism (Barone
1908; Lange 1936) system where firms are publicly owned, but exchange occurs in competitive
markets, and SOE managers are incentivized via performance contracts. Some adherents of
market socialism argue this is exactly what has been successfully implemented in China.
Critics of this idea argue that it is very hard for the government to commit not to intervene in
markets. Under market socialism, the government is omnipotent and can directly control all the
prices. Therefore, it is hard to protect market competition from the government monopoly, which
would not only expropriate the consumer surplus but would also undermine efficiency. It is also
hard for the government to commit to the strict antitrust policy that weakens the market power of
state-owned firms. Even in an open economy which “imports” product market competition, the
government still wields a monopoly in the labor market and in markets for nontradeables. The
government is also unable to commit to abstain from political pursuits while designing and
enforcing management contracts.
Another problem of government ownership is the inability to ensure the exit of failing firms.
Governments (or government banks) often bail out firms, private or public, in order to preserve
employment. This problem is especially severe in the case of the public firms. It is essentially
impossible for the state to commit to not bailing out its own firms. The resulting soft budget
constraints further aggravate the incentives problem for state-owned enterprises.
Yet another argument in favor of private ownership is the importance of innovation. Shleifer
1998 argues that innovation can only prosper under private ownership. While inventors can come
up with great ideas independently of the predominant ownership forms, further development and
commercialization of innovative ideas is certainly more likely under private ownership.
Policy Challenges: Speed, Sequencing and Methods
Complementarities and Sequencing
The debate above implies that the success of privatization depends on the quality of economic
and political institutions. Therefore reforms assuring property rights protection, competition and
openness, hard budget constraints, good corporate governance, low corruption, and optimal
regulation are all complementary to privatization.
The fundamental problem of privatization is that the need for privatization is stronger in
countries with less competent and accountable governments, yet these are exactly the countries
that lack mature economic and political institutions. Hence, the government that cannot run the
publicly owned firms well is often the government that is not able to design and implement
privatization well and to carry out the complementary reforms.
Privatizers in such countries face a chicken-and-egg problem. On one hand, they should first
build market institutions that would reinforce the benefits of privatization. On the other hand, it
is not clear why the reforms introducing such institutions would find any support until there is a
critical mass of private ownership. This problem is virtually absent in OECD countries where (a)
such institutions are already in place; (b) the majority of voters respect private property. The
situation is very different in developing and especially transition countries where prior to mass
privatization, the demand for market institutions is simply absent.
It is certainly not clear which approach is better suited for solving the chicken and egg problem.
Some countries have tried the “Machiavellian privatization” (Biais and Perotti 2002) approach
by selling cheap and fast in order to create a demand for institutions. Others delayed privatization
until the institutions were in place. In Central and Eastern Europe, both approaches were tried
and ultimately both succeeded – probably because of the external anchor of possible EU
accession. In the former Soviet Union, both approaches were attempted but neither seems to have
succeeded. In some countries, both privatization and institutional changes have been delayed
indefinitely; in others, privatization has happened but institutional change is still slow. In some
countries, particularly Russia, privatization was deemed illegitimate by the vast majority of
population because of the perceived corruption of the sale process. This eventually resulted in a
policy reversal, including major renationalizations.
Speed
An important policy choice is the speed of privatization. On one hand, in order to maximize
privatization revenues and find the most efficient owners, privatization should be administered
case by case rather than en masse. However, as Boycko, Shleifer, and Vishny 1995 argue,
privatization often has to be undertaken by a divided government. In this case, the window of
opportunity is very narrow and the case-by-case privatization is too slow while rapid, mass
privatization may assure the transformation’s irreversibility. The problem with mass
privatization is that if the government fails to design the mass privatization process well, this
may undermine the public support for further reforms and the legitimacy of the emerging private
property rights regime.
Another sequencing/speed issue is whether to restructure and improve performance before
privatization—not least in order to maximize privatization revenues. Boycko, Shleifer, and
Vishny 1995 argue that if the firm can be made profitable under public ownership, it should
probably not be privatized in the first place. And vice versa, if the firm is slated for privatization
as the government bureaucracy is not capable of running it, why trust the bureaucracy with
restructuring the firm?
Methods of Privatization: Share Issues, Trade Sales, or Non-Cash Privatization
Government can privatize firms through three major approaches: share issue privatization (SIP),
asset sales to a single buyer (trade sales), and non-cash (or “voucher”) privatization. The choice
between SIP and the trade sales is usually driven by size. Smaller firms are sold via private
markets (usually auctions) to a single buyer. This resolves the issue of separation of ownership
and control which is especially severe in countries with poor corporate governance. Larger firms
are harder to sell in their entirety, since the lack of financial intermediation precludes buyers
from raising sufficient funds to pay a high price for the asset (Maskin 2000). Such firms are
usually privatized via public capital markets.
In both SIPs and asset sales, an important decision is whether to allow foreigners to bid. For an
economist, increasing competition among bidders (either via SIP or in trade sales) should raise
privatization revenues and eventually attract a more efficient owner. However, foreign
participation is often ruled out due to political/nationalistic sentiment. In many cases, the
sentiment is promoted by the incumbent bidders, who benefit from the ban on foreign ownership
at the expense of the domestic public. Indeed, the exclusion of the foreign bidders raises
substantial problems, especially in the case of mass privatization. When a post-socialist
government is about to privatize a large part of the economy, there is insufficient wealth within
the country to assure a high price for the assets. Therefore one has to resort either to dispersed
ownership, even for small firms, or to non-cash privatization. The latter may result in inefficient
insider ownership and/or low privatization revenues, leading to disappointment with reforms.
Lessons from Privatization
The discussion above implies that privatization’s success depends on many variables, and there
is a large scope for empirical research to measure their relative importance. In this section we
summarize the results of such empirical studies.
Methodological Issues
Most studies focus on comparing the performance of firms under private and public ownership.
Some run cross-section regressions on the large samples of both private and public firms
estimating the effect of ownership controlling for other determinants of performance (see the
seminal paper by Boardman and Vining 1989). This approach is problematic as (a) ownership is
endogenous (Himmelberg, Hubbard, and Palia 1999) and (b) in a cross-section, it is very hard to
control for all possible determinants of performance at the firm level.
The other influential approach focuses on privatization per se rather than on ownership and
compares pre- and post-privatization performance of privatized firms. This approach–suggested
and first used by Megginson, Nash and van Randenborgh 1994, hereinafter referred to as MNR–
allows for comparing privatized firms in different industries, countries and even time periods.
The MNR methodology has become a tool of choice for privatization researchers as it only
requires data on the privatized firms for three years before and three years after the event of
privatization; such data are usually readily available.
Yet, MNR’s major advantage of looking only at the privatized firms is also a weakness. Indeed,
one should compare the change in performance of the privatized firms to that of the other firms,
public or private, that did not undergo privatization during this period. This approach is more
demanding as it requires a panel dataset that would track a large set of firms over a reasonably
long period of time (as described in Brown, Earle, and Telegdy 2006).
There are additional methodological problems with all the approaches. First, there are many
questions related to the appropriate measure of performance—such as whether it is best proxied
by stock market or accounting data. Second, there are endogeneity issues. To ensure their own
viability and to prevent the policy reversals, governments may begin by privatizing the firms that
are likely to benefit from privatization the most. This causes a selection bias. Another source of
selection bias is related to the quality of data, which is usually higher in countries with more
effective government and market institutions. As the latter are more conducive to the success of
privatization, it is likely that there are more studies of privatization successes than failures.
Third, studies of the firm-level impacts of privatization by definition miss the external effects of
privatization on the economy and society at large. In particular if the privatized firm is an
unregulated monopoly, the firm-level study is likely to find a productivity increase: the resulting
price increase will be recorded as a TFP growth even though the social returns may actually be
negative. There are a number of ways to go beyond the firm level. One can study the well-being
of the privatized firm’s customers. This is doable when the privatized firm is a utility company
serving a specific region or when there is a comprehensive privatization within an industry.
Alternatively, if a country goes through a mass privatization program, one can compare the
economic and social outcomes at the country level.
Summary of Research
Firm-level effects of privatization.
The extant firm-level empirical research on the change in productivity and employment around
the world is summarized in the Tables 1-4 (compiled from Megginson 2005, chapters 3 and 4,
and Chong and Lopes-de-Silanes 2005); see also tables 2.1-2.4 in Megginson 2005. The results
of these studies show that privatization usually results in increased productivity but also leads to
a reduction or no change in employment. There is also a strong evidence that privatization to
foreign investors results in higher productivity gains. Privatization brings higher benefits to the
firms wherever the appropriate institutions are in place. One should emphasize that tens of
studies on developed, developing and transition countries using very diverse methodologies seem
to yield very similar results.
Consistent with the critique of market socialism above, the evidence show that performance
contracts, corporatization, and hard budget constraints do not work without privatization (Table
5, Shirley and Xu, 1998, Shirley, 1999).
Country-level effects and complementary reforms.
Zinnes, Eilat, and Sachs 2001 study the transition experiences of 25 countries and show that
privatization is complementary to the institutional reforms that introduce rule-of-law, hard
budget constraints, and investor protection (see the Table 2.4 in Megginsion 2005). If these
institutions are not developed, privatization’s impact on the economic performance is actually
negative.
Restructuring prior to privatization. Does it pay to restructure the firm before privatizing? The
evidence suggests a negative answer, in line with the basic logic of privatization: privatization
makes sense precisely because governments are not good at restructuring firms. As shown by
Lopes-de-Silanes 1997 and Chong and Lopes-de-Silanes 2002, who study the effect of pre-
privatization restructuring on the net privatization price received, debt absorption has no effect
on the net price, while “investment” and “efficiency” programs actually reduce the price. Chong
and Lopes-de-Silanes also show that even labor force retrenchment programs are counter-
productive, as they all too often lead to adverse selection in the employees being let go.
Methods of sales. Megginson, Nash, Netter, and Poulsen 2004 study the determinants of the
choice between asset sales and share issue privatization. They show that the choice depends on
both the market institutions and the firm-specific factors. Larger and more profitable firms are
more likely to be sold via public capital markets. Better protection of property rights leads to a
higher chance of asset sales privatization.
The existing research on share issue privatization (summarized in Megginson 2005, chapter 6)
shows that these issues are substantially underpriced. Investors who buy the privatization share
issues earn statistically and economically significant excess returns (about 30%!) both in short-
and long-term. This is especially striking given that the corporate finance literature documents
negative long-term excess returns for private-sector share offerings. The underpricing probably
reflects the fact that privatizing governments pursue multiple goals rather than just revenue
maximization (see Boycko, Shleifer, and Vishny 1995 and Biais and Perotti 2002).
Welfare effects. Studies of the effects of privatization on social welfare and inequality have been
traditionally focused on utilities divestments. These studies measure the effect of privatization on
the access to services and generally find substantial benefits, especially for lower income groups
(see MacKenzie and Mookherjee 2003 for four countries in Latin America; Fischer, Serra, and
Gutierrez 2004 for Chile; Jones, Jammal and Gokgur 1998 for Cote d’Ivoire; Appiah-Kubi 2001
for Guinea). Galiani, Gertler, and Schargrodsky 2001 show that water privatization in Argentina
has resulted not only in substantial productivity growth but also in reduction in child mortality
(saving about 500 infant and young children lives per year). Similar results are obtained in the
studies of telecom privatizations (see Tables 4.12 and 4.13 in Megginson 2005 for a summary of
the results).
Stock market development. Another important impact of privatization is the development of
financial markets. Privatizations have contributed not only to the rise of the global capital
markets but, more importantly, have increased capitalization and liquidity of almost all non-U.S.
national stock markets. Boutchkova and Megginson 2000 calculate the turnover ratios (total
value of trading over the market capitalization) for individual financial markets and regress these
on the number of privatization deals in a given country in a particular year. Controlling for
country’s fixed effects and first-order autocorrelation, they find that each privatization raises the
stock market liquidity (proxied by the turnover ratio) by 2.3 percent in the next year and by
further 1.7 percent the year after that. The relationship between privatization and stock market
development seems to be well understood by the governments: Megginson, Nash, Netter, and
Poulsen 2004 show that governments are more likely to privatize through share issues in the
countries with less developed capital markets, apparently in order to foster stock market
development.
When Does Privatization NOT Work?
The most thorough panel study of mass privatization (Brown, Earle, and Telegdy 2006) shows
that privatization substantially improves productivity in Romania and Hungary (by about 20-
30%) but has no positive effect in Ukraine and even a negative effect in Russia. If the general
lesson from privatization research is that privatization usually “works”, how should one explain
the failure of privatization in Russia and other CIS countries? The evidence suggests that
privatization succeeds, but only if the relevant institutional environment is in place: private
property rights protection, rule-of-law, hard budget constraints, competition and regulation (see
Table 5 as well as Tables 1-4). In this respect, Russia and other CIS countries did not have the
benefit of prospective EU accession to force the pace of necessary reforms. Also, EU accession
made privatization irreversible in Central and Eastern Europe, while in the CIS policy reversal
was indeed an important risk (which did in fact materialize in Belarus and Russia, and almost
materialized in Ukraine), hence a fast mass privatization was needed. The other major problem in
the CIS arose from the decision to rule out foreign participation in privatization for ideological
reasons. Given all the constraints, Russian and other CIS privatizers had to adopt non-cash
privatizations.
Research shows that non-cash privatization is inferior to trade sales and share issue privatization.
The intuition is straightforward. First, non-cash privatization results in insider ownership, which
implies that demand for institutional reforms develops very slowly. Since market institutions are
not in place, secondary market trading results in ownership concentration in the hands of a few
politically connected owners (in Faccio’s dataset, Russia comes firms in terms of political
connections). The larger the insider’s ownership stake the more he or she is protected from
expropriation and regulation, and the more market power the company has. Therefore it is not
surprising in Russia, Ukraine and other CIS countries the post-privatization redistribution results
in economic domination by a few large business groups (Guriev and Rachinsky 2005). The role
of these so called “oligarchs” is not clear. On one hand, they improve performance of their own
firms and provide the only counterweight to a predatory government. They also represent the
only significant constituency for whatever pro-market institutional change might take place in
Russia (Boone and Rodionov 2002 and Guriev and Rachinsky 2005). On the other hand, their
dominance subverts institutions in their own favor at the expense of competition policy and entry
of new firms (Glaeser et al., 2003, Sonin, 2003, Acemoglu, 2005).
The other implication of non-cash mass privatization is the resulting fragility and ambiguity of
private property rights. As the owners have paid relatively little for the assets, voters believe that
privatization is not fair and the politicians can always find support for expropriation; this risk
undermines incentives to invest. Moreover, the negative attitude to privatization may eventually
result in a nationalization backlash (as observed in Russia since early 2004).
Given all the problems with privatization in Russia, was there a better alternative? Boycko,
Shleifer, and Vishny 1995 and Nellis 1999 argue the voucher privatization was the lesser evil.
Also, although Russian transition is taking longer than in CEE, it is still happening while in
Belarus and a few other CIS countries the reforms are delayed indefinitely. It is also important to
put the Russian experience in perspective. Grosfeld and Hashi 2003 show that even though
Czech Republic and Poland have pursued very different privatization policies, the ultimate
ownership structures are actually quite similar and are driven by the same factors. This is also
consistent with the studies in Table 4: privatization works in Russia as well whenever it results in
concentrated ownership (in particular, foreign ownership). By design, the Russian voucher
privatization program did not generate such ownership structure right away but the post-
privatization reallocation should eventually produce an efficient ownership structure. Because of
underdeveloped financial markets and legal system it has taken much longer than expected but
the recent comprehensive study of ownership structure in Russian industry (Guriev and
Rachinsky 2003) shows that this pattern is finally emerging.
The “Great Outlier”: China
Another case study often used by the opponents of privatization is the transition experience of
China. Allegedly, China is growing very fast without mass privatization, or even due to the
decision not to privatize. However, the existing evidence suggests that privatization works in
China as well (see Table 7). Foreign ownership and foreign listing (in particular, listing in Hong-
Kong) also positively affect performance.
It is also not true that China has not privatized, although initially the government decided to try
to improve SOE performance without privatization. As these hopes faded, China began
privatizing smaller SOEs or leasing them to managers in an exchange of a fixed share of the
resulting profit (Kikeri and Kolo 2005). This arrangement can be likened to partial privatization.
Much privatization has also occurred via foreign direct investment into China. As a result,
employment at Chinese state-owned industrial enterprises fell by half during 1990s.
China has also undertaken case-by-case privatizations of minority blocks for a few hundred large
SOEs. According to the World Bank Privatization Database, there were about 200 large
privatization deals between 1991 and 2003 that yielded revenues of more than 18 billion dollars–
about as much as the entire Russian privatization. However, partial privatization did not result in
substantial efficiency improvements; one reason was the prevalence of soft budget constraints
resulting from state banks making non-performing loans to SOEs. While further privatization is
certainly needed, the Chinese government is delaying full privatization of all SOEs out of fear of
high unemployment and the attendant negative political implications.
Conclusions and Policy Implications.
There is now a growing body of research on all aspects of privatization that uses detailed datasets
and up-to-date methodology. This research provides solid evidence that privatization “generally”
works, both for the firms that are privatized and for privatizing economies as a whole. While
privatization usually results both in increased productivity and reduced employment in privatized
firms, fears of negative overall effects at the economy level are not justified.
An important caveat here is that the benefits of privatizations depend on market institutions
being in place. The countries that manage to ensure property rights protection and the rule-of-
law, impose hard budget constraints, increase competition, and improve corporate governance
reap the largest benefits. If appropriate institutions are not in place, privatization often fails to
improve performance at the firm level and for the economy as a whole.
Emprical research provides a strong case for openness in privatization. Virtually all studies point
to a positive role of foreign investors. Firms privatized to foreign owners exhibit the highest
productivity increases. Moreover, as foreign owners usually buy the assets in a more competitive
bidding process, they are likely to pay a high price for the privatized assets—and the threat of
competition from foreign bidders also tends to raise the bids of domestic investors. Receiving a
high net privatization price is important, not only for fiscal reasons, but also for the political
legitimacy of emerging private property rights and the sustainability of reforms.
Once translated into policymakers’ language, the lessons from privatization research are quite
straightforward, as summarized below.
- Privatization can deliver substantial benefits. In some cases productivity doubles; in other
cases it increases by single percentage points. The “weighted average” productivity
increase is probably around 20 percent.
- Privatization is usually accompanied by either no change or a reduction in employment.
Privatizers should be prepared to handle the increased unemployment, and experience
suggests tht most privatizing countries manage this problem reasonably well.
- Privatization usually produces welfare gains beyond the increased productivity at the firm
level.
- Restructuring enterprises prior to privatization is unlikely to work.
- Mass privatization is usually inferior to the case by case approach. Non-cash privatization
is generally worse than trade sales and share issue privatization. The choice between
share issue privatizations and trade sales is driven by several factors-firm size, the need to
develop national stock markets, and the trade-off between better governance under
concentrated ownership versus the difficulty of finding a single buyer for a large
company.
- Policy trade-offs are resolved most effectively when privatization is transparent and open
to foreign investors. However, insiders and domestic investors always lobby against
allowing foreign participation and often stir up nationalistic sentiment. Precluding foreign
ownership always results in lower privatization prices and lower post-privatization
efficiency.
- Share issue privatization brings an important side benefit of contributing to the
development of the national stock market.
- Privatization works well wherever there are good institutions. China and Russia are not
outliers. China’s growth has come from private sector development, even as many SOEs
are still destroying value. Russia lacked good institutions yet the demand for institutions
has started to emerge. While this may be happening more slowly than expected–due to
macroeconomic instability, or inequality and illegitimacy of property rights–it is not clear
whether there was a better alternative, since openness to foreigners was probably
politically unacceptable.
References
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Tab
le 1
. Sum
mar
y of
Em
piri
cal S
tudi
es C
ompa
ring
Pre
Ver
sus
Pos
t-P
riva
tiza
tion
Per
form
ance
Cha
nges
for
Fir
ms
Pri
vati
zed
Via
Pub
lic S
hare
O
ffer
ings
in N
on-T
rans
itio
n E
cono
mie
s
Stud
y
Sam
ple
desc
ript
ion,
stu
dy p
erio
d, a
nd m
etho
dolo
gy
Sum
mar
y of
em
piri
cal f
indi
ngs
and
conc
lusi
ons
Meg
gins
on,
Nas
h, a
nd v
an
Ran
denb
orgh
(1
994)
Com
pare
3-y
ear
aver
age
post
-pri
vati
zati
on f
inan
cial
and
ope
rati
ng
perf
orm
ance
rat
ios
to th
e 3-
year
pre
-pri
vatiz
atio
n va
lues
for
61
firm
s fr
om 1
8 co
untr
ies
and
32 in
dust
ries
fro
m 1
961-
1989
. Tes
t si
gnif
ican
ce o
f m
edia
n ch
ange
s in
pos
t ver
sus
pre-
priv
atiz
atio
n pe
riod
. Als
o em
ploy
bin
omia
l tes
ts f
or %
of
firm
s ch
angi
ng a
s pr
edic
ted.
Doc
umen
t eco
nom
ical
ly &
sta
tist
ical
ly s
igni
fica
nt p
ost-
priv
atiz
atio
n in
crea
ses
in o
utpu
t (re
al s
ales
), o
pera
ting
eff
icie
ncy,
pr
ofita
bilit
y, c
apita
l inv
estm
ent s
pend
ing,
and
div
iden
d pa
ymen
ts,
as w
ell a
s si
gnif
ican
t dec
reas
es in
leve
rage
. No
evid
ence
of
empl
oym
ent d
eclin
es a
fter
pri
vatiz
atio
n, b
ut s
igni
fica
nt c
hang
es in
fi
rm d
irec
tors
. Pri
vati
zati
on im
prov
es f
irm
per
form
ance
.
Bou
bakr
i and
C
osse
t (19
98)
Com
pare
3-y
ear
aver
age
post
-pri
vati
zati
on f
inan
cial
and
ope
rati
ng
perf
orm
ance
rat
ios
to th
e 3-
year
pre
-pri
vatiz
atio
n va
lues
for
79
com
pani
es f
rom
21
deve
lopi
ng c
ount
ries
and
32
indu
stri
es o
ver
the
peri
od 1
980-
1992
. Tes
ts f
or th
e si
gnif
ican
ce o
f m
edia
n ch
ange
s in
ra
tio v
alue
s in
pos
t ver
sus
pre-
priv
atiz
atio
n pe
riod
. Als
o em
ploy
bi
nom
ial t
ests
for
per
cent
age
of f
irm
s ch
angi
ng a
s pr
edic
ted.
Doc
umen
t eco
nom
ical
ly &
sta
tist
ical
ly s
igni
fica
nt p
ost-
priv
atiz
atio
n in
crea
ses
in o
utpu
t (re
al s
ales
), o
pera
ting
eff
icie
ncy,
pr
ofita
bilit
y, c
apita
l inv
estm
ent s
pend
ing,
div
iden
d pa
ymen
ts, a
nd
empl
oym
ent-
-as
wel
l as
sign
ific
ant d
ecre
ases
in le
vera
ge.
Per
form
ance
impr
ovem
ents
are
gen
eral
ly e
ven
larg
er th
an th
ose
docu
men
ted
by M
eggi
nson
, Nas
h, a
nd v
an R
ande
nbor
gh.
D’S
ouza
and
M
eggi
nson
(1
999)
Doc
umen
t off
erin
g te
rms,
met
hod
of s
ale,
and
ow
ners
hip
stru
ctur
e re
sulti
ng f
rom
pri
vatiz
atio
n of
78
com
pani
es f
rom
10
deve
lopi
ng
and
15 d
evel
oped
cou
ntri
es o
ver
the
peri
od 1
990-
94. T
hen
com
pare
3-
year
ave
rage
pos
t-pr
ivat
izat
ion
fina
ncia
l and
ope
rati
ng
perf
orm
ance
rat
ios
to th
e 3-
year
pre
-pri
vatiz
atio
n va
lues
for
a s
ub-
sam
ple
of 2
6 fi
rms
wit
h su
ffic
ient
dat
a. T
ests
for
the
sign
ific
ance
of
med
ian
chan
ges
in r
atio
val
ues
in p
ost v
ersu
s pr
e-pr
ivat
izat
ion
peri
od. A
lso
bino
mia
l tes
ts f
or %
of
firm
s ch
angi
ng a
s pr
edic
ted.
Doc
umen
t eco
nom
ical
ly &
sta
tist
ical
ly s
igni
fica
nt p
ost-
priv
atiz
atio
n in
crea
ses
in o
utpu
t (re
al s
ales
), o
pera
ting
eff
icie
ncy,
an
d pr
ofita
bilit
y, a
s w
ell a
s si
gnif
ican
t dec
reas
es in
leve
rage
. C
apita
l inv
estm
ent s
pend
ing
incr
ease
s--b
ut in
sign
ific
antl
y, w
hile
em
ploy
men
t dec
line
s si
gnif
ican
tly.
Mor
e of
the
firm
s pr
ivat
ized
in
the
1990
s ar
e fr
om te
leco
ms
and
othe
r re
gula
ted
indu
stri
es.
Pri
vatiz
atio
n im
prov
es f
irm
per
form
ance
.
Dew
ente
r an
d M
alat
esta
(20
00)
Com
pare
pre
- ve
rsus
pos
t-pr
ivat
izat
ion
perf
orm
ance
of
63 la
rge,
hi
gh-i
nfor
mat
ion
com
pani
es d
ives
ted
duri
ng 1
981-
94 o
ver
both
sh
ort-
term
[(+
1 to
+3)
vs
(-3
to -
1)]
and
long
-ter
m [
(+1
to +
5) v
s (
-10
to -
1)]
hori
zons
. Als
o ex
amin
e lo
ng-r
un s
tock
ret
urn
perf
orm
ance
of
pri
vati
zed
firm
s an
d co
mpa
re th
e re
lati
ve p
erfo
rman
ce o
f a
larg
e sa
mpl
e (1
,500
fir
m-y
ears
) of
sta
te a
nd p
riva
tely
ow
ned
firm
s du
ring
19
75, 1
985,
and
199
5.
Doc
umen
t sig
nifi
cant
incr
ease
s in
pro
fita
bilit
y (u
sing
net
inco
me)
an
d si
gnif
ican
t dec
reas
es in
leve
rage
and
labo
r in
tens
ity
(em
ploy
ees÷
sale
s) o
ver
both
sho
rt a
nd lo
ng-t
erm
com
pari
son
hori
zons
. Ope
ratin
g pr
ofits
incr
ease
pri
or to
pri
vatiz
atio
n, b
ut n
ot
afte
r. D
ocum
ent s
igni
fica
ntly
pos
itiv
e lo
ng-t
erm
(1-
5 ye
ars)
ab
norm
al s
tock
ret
urns
, mos
tly
conc
entr
ated
in H
unga
ry, P
olan
d,
and
the
UK
. Res
ults
als
o st
rong
ly in
dica
te th
at p
riva
te f
irm
s ou
t-pe
rfor
m s
tate
-ow
ned
firm
s.
Bou
bakr
i, C
osse
t an
d G
uedh
ami
(200
2)
Inve
stig
ate
the
role
of
owne
rshi
p st
ruct
ure
and
inve
stor
pro
tect
ion
in
corp
orat
e go
vern
ance
usi
ng a
sam
ple
of 1
70 f
irm
s fr
om 2
6 de
velo
ping
cou
ntri
es th
at w
ere
priv
atiz
ed o
ver
the
1980
-97.
S
peci
fica
lly
exam
ine
wha
t ow
ners
hip
stru
ctur
e re
sult
s fr
om
Doc
umen
t tha
t pri
vate
ow
ners
hip
tend
s to
con
cent
rate
ove
r ti
me
afte
r di
vest
men
t, an
d th
at p
riva
tizat
ion
inde
ed r
esul
ts in
a
relin
quis
hmen
t of
cont
rol b
y th
e pr
ivat
izin
g go
vern
men
t ove
r th
ree
year
s af
ter
initi
al s
ale.
Muc
h of
the
decr
ease
in s
tate
ow
ners
hip
is
priv
atiz
atio
n, a
nd h
ow it
evo
lves
sub
sequ
entl
y; h
ow th
e le
vel o
f ow
ners
hip
prot
ectio
n im
pact
s po
st-p
riva
tizat
ion
owne
rshi
p st
ruct
ure;
an
d ho
w o
wne
rshi
p st
ruct
ure
and
inve
stor
pro
tect
ion
rela
te to
fir
m
perf
orm
ance
.
abso
rbed
by
fore
ign
and
loca
l ins
titu
tiona
l inv
esto
rs, w
hile
the
aver
age
stak
e he
ld b
y in
divi
dual
s is
less
impo
rtan
t. A
lso
find
that
in
tera
ctio
n be
twee
n le
gal p
rote
ctio
n an
d ow
ners
hip
conc
entr
atio
n ha
s a
sign
ific
ant n
egat
ive
effe
ct o
n fi
rm p
erfo
rman
ce, s
ugge
stin
g th
at o
wne
rshi
p co
ncen
trat
ion
mat
ters
mor
e in
cou
ntri
es w
ith
wea
k le
gal p
rote
ctio
n.
Bou
bakr
i and
C
osse
t (20
03)
Exa
min
e pr
e- v
ersu
s po
st-p
riva
tizat
ion
perf
orm
ance
of
16 A
fric
an
firm
s pr
ivat
ized
thro
ugh
publ
ic s
hare
off
erin
g du
ring
the
peri
od
1989
-199
6. A
lso
sum
mar
ize
find
ings
of
thre
e ot
her
stud
ies
pert
aini
ng to
pri
vatiz
atio
n in
dev
elop
ing
coun
trie
s.
Doc
umen
t sig
nifi
cant
ly in
crea
sed
capi
tal s
pend
ing
by p
riva
tize
d fi
rms,
but
fin
d on
ly in
sign
ific
ant c
hang
es in
pro
fita
bilit
y,
effi
cien
cy, o
utpu
t and
leve
rage
.
Mac
quie
ira
and
Zur
ita (
1996
)
Com
pare
pre
- ve
rsus
pos
t-pr
ivat
izat
ion
perf
orm
ance
of
22 C
hile
an
com
pani
es p
riva
tized
fro
m 1
984
to 1
989.
Use
Meg
gins
on, N
ash
and
van
Ran
denb
orgh
(M
NR
) m
etho
dolo
gy to
per
form
ana
lysi
s fi
rst
wit
hout
adj
ustin
g fo
r ov
eral
l mar
ket m
ovem
ents
(as
in M
NR
), th
en
wit
h an
adj
ustm
ent f
or c
onte
mpo
rane
ous
chan
ges.
Una
djus
ted
resu
lts
virt
uall
y id
enti
cal t
o M
NR
: sig
nifi
cant
incr
ease
s in
out
put,
prof
itabi
lity,
em
ploy
men
t, in
vest
men
t, an
d di
vide
nd
paym
ents
. Aft
er a
djus
ting
for
mar
ket m
ovem
ents
, how
ever
, the
ch
ange
s in
out
put,
empl
oym
ent,
and
liqui
dity
are
no
long
er
sign
ific
ant,
and
leve
rage
incr
ease
s si
gnif
ican
tly.
Ver
brug
ge,
Meg
gins
on a
nd
Ow
ens
(199
9)
Stud
y of
feri
ng te
rms
and
shar
e ow
ners
hip
resu
lts f
or 6
5 ba
nks
full
y or
par
tially
pri
vatiz
ed f
rom
198
1 to
199
6. T
hen
com
pare
pre
and
po
st-p
riva
tizat
ion
perf
orm
ance
cha
nges
for
32
bank
s in
OE
CD
co
untr
ies
and
5 in
dev
elop
ing
coun
trie
s.
Doc
umen
t mod
erat
e pe
rfor
man
ce im
prov
emen
ts in
OE
CD
co
untr
ies.
Rat
ios
prox
ying
for
pro
fita
bilit
y, f
ee in
com
e (n
on-
inte
rest
inco
me
as f
ract
ion
of to
tal)
, and
cap
ital
ade
quac
y in
crea
se
sign
ific
antl
y; le
vera
ge r
atio
dec
lines
sig
nifi
cant
ly. D
ocum
ent l
arge
, on
goin
g st
ate
owne
rshi
p, a
nd s
igni
fica
ntly
pos
itiv
e in
itial
ret
urns
to
IPO
inve
stor
s.
Boa
rdm
an,
Lau
rin
and
Vin
ing
(200
0)
Com
pare
3-y
ear
aver
age
post
-pri
vati
zati
on f
inan
cial
and
ope
rati
ng
perf
orm
ance
rat
ios
to th
e 5-
year
pre
-pri
vatiz
atio
n va
lues
for
9
Can
adia
n fi
rms
priv
atiz
ed f
rom
198
8 to
199
5. A
lso
com
pute
long
-ru
n (u
p to
5 y
ears
) st
ock
retu
rns
for
dive
sted
fir
ms.
Find
that
pro
fita
bilit
y, m
easu
red
as r
etur
n on
sal
es o
r as
sets
, mor
e th
an d
oubl
es a
fter
pri
vatiz
atio
n, w
hile
eff
icie
ncy
and
sale
s al
so
incr
ease
sig
nifi
cant
ly (
thou
gh le
ss d
rast
ical
ly).
Lev
erag
e an
d em
ploy
men
t dec
line
sig
nifi
cant
ly, w
hile
cap
ital
spe
ndin
g in
crea
ses
sign
ific
antl
y. P
riva
tize
d fi
rms
also
sig
nifi
cant
ly o
ut-p
erfo
rm
Can
adia
n st
ock
mar
ket o
ver
all l
ong-
term
hol
ding
per
iods
.
Om
ran
(200
1)
Stud
ies
perf
orm
ance
cha
nges
for
69
Egy
ptia
n co
mpa
nies
pri
vatiz
ed
betw
een
1994
and
199
8. O
f th
ese,
33
wer
e m
ajor
ity s
ales
(>
50%
ow
ners
hip)
, 18
wer
e pa
rtia
l sal
es, 1
2 w
ere
sold
to e
mpl
oyee
sh
areh
oldi
ng a
ssoc
iati
ons
(ES
As)
, and
6 w
ere
sold
to a
ncho
r in
vest
ors.
Find
that
pro
fita
bilit
y, o
pera
ting
eff
icie
ncy,
cap
ital s
pend
ing,
di
vide
nds
and
liqui
dity
incr
ease
sig
nifi
cant
ly a
fter
pri
vatiz
atio
n,
whi
le le
vera
ge, e
mpl
oym
ent a
nd f
inan
cial
ris
k (m
easu
red
as th
e in
vers
e of
tim
es in
tere
st e
arne
d) d
ecli
ne s
igni
fica
ntly
. Per
form
ance
ch
ange
s pe
rvas
ive
acro
ss s
ubgr
oups
, but
som
e ev
iden
ce th
at f
ull
priv
atiz
atio
n w
orks
bet
ter
than
par
tial,
and
that
sal
es to
ES
As
wor
k be
tter
than
oth
ers.
Om
ran
(200
2)
Per
form
sim
ilar
stu
dy to
Om
ran
(200
1), b
ut a
lso
com
pare
pe
rfor
man
ce o
f pr
ivat
ized
com
pani
es to
a m
atch
ed s
et o
f 54
fir
ms
that
rem
aine
d st
ate
owne
d.
Find
that
SO
Es’
per
form
ance
als
o im
prov
es s
igni
fica
ntly
dur
ing
post
-pri
vatiz
atio
n pe
riod
, and
that
pri
vatiz
ed f
irm
s di
d no
t per
form
an
y be
tter
than
SO
Es.
Okt
en a
nd A
rin
(200
1)
Tes
t eff
ect o
f pr
ivat
izat
ion
on f
irm
eff
icie
ncy
and
tech
nolo
gy c
hoic
e us
ing
pane
l dat
a se
t of
23 T
urki
sh c
emen
t fir
ms
priv
atiz
ed b
etw
een
1989
and
199
8. E
mpl
oy M
NR
test
s fi
rst,
then
pan
el d
ata
regr
essi
on
to e
xplo
re d
eter
min
ants
of
perf
orm
ance
cha
nges
.
Doc
umen
t tha
t pro
duct
ivit
y, c
apac
ity
util
izat
ion,
out
put a
nd
inve
stm
ent s
igni
fica
ntly
incr
ease
aft
er p
riva
tizat
ion,
whi
le
empl
oym
ent,
per
unit
cost
s an
d pr
ices
dec
line
sign
ific
antl
y.
Cap
acit
y in
crea
ses
insi
gnif
ican
tly.
Pan
el r
egre
ssio
n sh
ows
outp
ut,
labo
r pr
oduc
tivit
y, c
apita
l and
cap
ital t
o la
bor
ratio
incr
ease
si
gnif
ican
tly,
whi
le e
mpl
oym
ent f
alls
. Per
uni
t cos
ts a
nd p
rice
s al
so
fall.
Pri
vatiz
atio
n cl
earl
y in
duce
s te
chno
logy
shi
ft.
Sun
and
Ton
g (2
002)
C
ompa
re p
re v
s po
st-p
riva
tizat
ion
fina
ncia
l and
ope
ratin
g pe
rfor
man
ce o
f a
sam
ple
of 2
4 M
alay
sian
fir
ms
dive
sted
via
pub
lic
shar
e of
feri
ng b
y th
e en
d of
199
7. E
mpl
oy M
NR
test
s fi
rst,
then
pa
nel d
ata
regr
essi
on to
fur
ther
exa
min
e so
urce
s of
per
form
ance
ch
ange
s.
Find
that
pri
vati
zed
com
pani
es in
crea
se th
eir
abso
lute
leve
l of
prof
its th
ree-
fold
, mor
e th
an d
oubl
e re
al s
ales
, and
als
o si
gnif
ican
tly
incr
ease
div
iden
ds a
nd r
educ
e le
vera
ge. R
esul
ts a
re
robu
st a
cros
s va
riou
s su
b-sa
mpl
es. S
tock
s of
pri
vatiz
ed f
irm
s ea
rn
norm
al r
etur
ns (
insi
gnif
ican
tly
diff
eren
t fro
m m
arke
t ind
ex).
R
egre
ssio
n an
alys
is s
how
s th
at in
stitu
tiona
l inv
esto
rs a
nd d
irec
tors
ha
ve p
osit
ive
impa
ct o
n pr
ivat
ized
fir
m p
erfo
rman
ce, a
nd th
at
optio
n sc
hem
es, r
athe
r th
an d
irec
t rem
uner
atio
n, g
ive
bette
r in
cent
ives
to m
anag
ers.
Sun
and
Ton
g (2
002)
T
est w
heth
er p
riva
tizat
ion
impr
oves
fin
anci
al a
nd o
pera
ting
perf
orm
ance
of
31 S
inga
pore
an c
ompa
nies
div
este
d th
roug
h pu
blic
sh
are
offe
ring
bet
wee
n 19
75 a
nd 1
998.
Em
ploy
MN
R te
sts
firs
t, th
en p
anel
dat
a re
gres
sion
to f
urth
er e
xam
ine
sour
ces
of
perf
orm
ance
cha
nges
.
Find
no
sign
ific
ant c
hang
e af
ter
priv
atiz
atio
n in
any
var
iabl
e ex
cept
ou
tput
(si
gnif
ican
t inc
reas
e) u
sing
MN
R m
etho
ds. T
hen
use
regr
essi
on a
naly
sis
to s
how
that
out
put a
nd le
vera
ge im
prov
e bu
t ef
fici
ency
det
erio
rate
s af
ter
priv
atiz
atio
n. C
oncl
ude
that
ther
e is
lit
tle p
erfo
rman
ce im
prov
emen
t aft
er o
wne
rshi
p ch
ange
bec
ause
Si
ngap
orea
n SO
Es
wer
e un
usua
lly
wel
l man
aged
bef
ore
dive
stm
ent.
Tab
le 2
. Sum
mar
y of
Em
piri
cal S
tudi
es o
f P
riva
tiza
tion
: D
evel
oped
Cou
ntri
es
Stud
y Sa
mpl
e de
scri
ptio
n, s
tudy
per
iod,
and
met
hodo
logy
Su
mm
ary
of e
mpi
rica
l fin
ding
s an
d co
nclu
sion
s
Gal
al,
Jone
s,
Tan
don,
and
V
ogel
sang
(1
994)
Com
pare
act
ual p
ost-
priv
atiz
atio
n pe
rfor
man
ce o
f 12
la
rge
firm
s (m
ostl
y ai
rlin
es a
nd r
egul
ated
uti
litie
s) in
B
rita
in, C
hile
, Mal
aysi
a, a
nd M
exic
o to
pre
dict
ed
perf
orm
ance
of
thes
e fi
rms
had
they
rem
aine
d S
OE
s.
Doc
umen
t net
wel
fare
gai
ns in
11
of th
e 12
cas
es th
at e
qual
, on
aver
age,
26%
of
the
firm
s’ p
re-d
ives
titu
re s
ales
. Fin
d no
cas
e w
here
wor
kers
are
mad
e w
orse
off
, and
3
whe
re w
orke
rs a
re m
ade
sign
ific
antl
y be
tter
off
.
Gre
en a
nd
Vog
elsa
ng
(199
4)
Pro
vide
a h
isto
rica
l ove
rvie
w o
f B
A’s
evo
luti
on a
s a
stat
e ow
ned
ente
rpri
se th
roug
h its
fir
st y
ears
as
a fu
lly
priv
atiz
ed c
ompa
ny. A
lso
anal
yze
how
ope
rati
ng a
nd
fina
ncia
l per
form
ance
evo
lves
dur
ing
the
tim
e be
fore
an
d af
ter
com
pany
’s s
ale.
The
y sh
ow th
at B
A s
uffe
red
seve
rely
dur
ing
the
airl
ine
depr
essi
on o
f th
e ea
rly
1980
s,
but t
hat t
he o
pera
tion
al c
hang
es a
nd r
estr
uctu
ring
that
the
man
agem
ent t
eam
exe
cute
s du
ring
the
mid
198
0s p
aves
the
way
for
the
succ
essf
ul s
ale
of th
e go
vern
men
t’s
100
perc
ent o
wne
rshi
p in
198
7.
Mar
tin &
P
arke
r (1
995)
Usi
ng tw
o m
easu
res
(RO
R o
n ca
pita
l em
ploy
ed a
nd
annu
al g
row
th in
val
ue-a
dded
per
em
ploy
ee-h
our)
, ex
amin
e w
heth
er 1
1 B
ritis
h fi
rms
priv
atiz
ed d
urin
g 19
81-8
8 im
prov
e pe
rfor
man
ce a
fter
div
estm
ent.
Als
o at
tem
pt to
con
trol
for
bus
ines
s cy
cle
effe
cts.
Mix
ed r
esul
ts. O
utri
ght p
erfo
rman
ce im
prov
emen
ts a
fter
pri
vatiz
atio
n fo
und
in le
ss
than
hal
f of
fir
m-m
easu
res
stud
ied.
Sev
eral
impr
ove
prio
r to
div
esti
ture
, ind
icat
ing
an
init
ial “
shak
e-ou
t” e
ffec
t upo
n pr
ivat
izat
ion
anno
unce
men
t.
Pri
ce a
nd
Wey
man
-Jo
nes
(199
6)
Mea
sure
the
tech
nica
l eff
icie
ncy
of th
e U
.K. n
atur
al
gas
indu
stry
bef
ore
and
afte
r it
s 19
86 p
riva
tizat
ion
and
asso
ciat
ed r
egul
ator
y ch
ange
s us
ing
Mal
mqu
ist i
ndic
es
and
non-
para
met
ric
fron
tier
anal
ysis
.
Show
that
the
indu
stry
’s r
ate
of p
rodu
ctiv
ity
grow
th in
crea
sed
sign
ific
antl
y af
ter
priv
atiz
atio
n—th
ough
not
as
muc
h as
it c
ould
hav
e if
the
indu
stry
had
bee
n re
stru
ctur
ed a
nd s
ubje
cted
to d
irec
t com
petit
ion
and
mor
e ap
prop
riat
e re
gula
tion.
New
berr
y an
d P
ollit
t (1
997)
Per
form
a c
ost-
bene
fit a
naly
sis
of th
e 19
90
rest
ruct
urin
g an
d pr
ivat
izat
ion
of th
e C
entr
al
Ele
ctri
city
Gen
erat
ing
Boa
rd (
CE
GB
). C
ompa
re th
e ac
tual
per
form
ance
of
the
priv
atiz
ed f
irm
s to
a c
ount
er-
fact
ual a
ssum
ing
CE
GB
had
rem
aine
d st
ate-
owne
d.
The
res
truc
turi
ng/p
riva
tiza
tion
of
CE
GB
was
“w
orth
it,”
in th
at th
ere
is a
per
man
ent
cost
red
ucti
on o
f 5
perc
ent p
er y
ear.
Pro
duce
rs a
nd s
hare
hold
ers
capt
ure
all t
his
bene
fit a
nd m
ore.
Con
sum
ers
and
the
gove
rnm
ent l
ose.
Als
o sh
ow th
at a
ltern
ativ
e fu
el
purc
hase
s in
volv
e un
nece
ssar
ily
high
cos
ts a
nd w
ealth
flo
ws
out o
f th
e co
untr
y.
Lau
rin
and
Boz
ec
(200
0)
Com
pare
s pr
oduc
tivit
y an
d pr
ofita
bilit
y of
two
larg
e C
anad
ian
rail
carr
iers
, bef
ore
and
afte
r th
e 19
95
priv
atiz
atio
n of
Can
adia
n N
atio
nal (
CN
). C
ompa
res
acco
unti
ng r
atio
s fo
r en
tire
17-
year
per
iod
1981
-199
7 an
d fo
r th
ree
sub-
peri
ods:
the
full
y st
ate-
owne
d er
a (1
981-
91),
the
pre-
priv
atiz
atio
n pe
riod
(19
92-9
5), a
nd
Tot
al f
acto
r pr
oduc
tivit
y of
CN
muc
h lo
wer
than
that
of
priv
atel
y ow
ned
Can
adia
n P
acif
ic (
CP
) du
ring
198
1-91
per
iod,
but
bec
omes
just
as
effi
cien
t dur
ing
pre-
priv
atiz
atio
n (1
992-
95)
peri
od, t
hen
exce
eds
it a
fter
199
5. C
N s
tock
pri
ce o
ut-
perf
orm
s C
P, t
he tr
ansp
orta
tion
indu
stry
, and
the
Can
adia
n m
arke
t aft
er 1
995.
Bot
h fi
rms
shed
wor
kers
aft
er 1
992,
but
CN
’s e
mpl
oym
ent d
eclin
es b
y m
ore
(34%
vs
18%
) as
ave
rage
pro
duct
ivit
y al
mos
t dou
bles
(97
% in
crea
se).
CN
’s c
apit
al s
pend
ing
the
post
-pri
vati
zati
on e
ra. A
lso
exam
ines
sto
ck r
etur
ns
from
199
5-98
. Cre
ates
a s
ix-f
irm
com
pari
son
grou
p of
C
anad
ian
priv
atiz
atio
ns, a
nd c
ompu
tes
acco
unti
ng
ratio
s an
d st
ock
retu
rns
for
thes
e fi
rms
as w
ell.
incr
ease
s si
gnif
ican
tly,
thou
gh C
P in
crea
ses
mor
e. S
ix-f
irm
Can
adia
n pr
ivat
izat
ion
com
pari
son
grou
p al
so e
xper
ienc
e si
gnif
ican
t inc
reas
es in
inve
stm
ent s
pend
ing
and
prod
uctiv
ity,
and
a s
igni
fica
nt d
eclin
e in
em
ploy
men
t.
Vill
alon
ga
(200
0)
Exa
min
es th
e ef
fect
of
priv
atiz
atio
n on
eff
icie
ncy
for
24 S
pani
sh f
irm
s fu
lly
dive
sted
bet
wee
n 19
85 a
nd
1993
. Tes
ts f
or s
epar
ate
effe
cts
of o
wne
rshi
p ch
ange
, on
ce o
ther
pol
itica
l and
org
aniz
atio
nal f
acto
rs a
nd ti
me
peri
od (
stat
e of
the
busi
ness
cyc
le)
effe
cts
acco
unte
d fo
r.
Find
insi
gnif
ican
t cha
nges
in le
vel a
nd g
row
th r
ate
of e
ffic
ienc
y af
ter
priv
atiz
atio
n.
Sign
ific
ant p
ositi
ve e
ffec
t fou
nd f
or b
usin
ess
cycl
e su
gges
ts g
over
nmen
t sol
d fi
rms
duri
ng r
eces
sion
s. C
apita
l int
ensi
ty, f
orei
gn o
wne
rshi
p an
d si
ze a
lso
posi
tivel
y re
late
d to
eff
icie
ncy
impr
ovem
ents
. Pri
vati
zati
on s
eem
s to
dec
reas
e ef
fici
ency
for
5 a
nd 6
ye
ars
afte
r di
vest
itur
e, b
ut in
crea
se e
ffic
ienc
y 7
and
8 ye
ars
afte
r an
d 4
and
3 ye
ars
befo
re, s
ugge
stin
g im
port
ance
of
tim
e ef
fect
s.
Flor
io
(200
1)
Pre
sent
s an
ana
lysi
s of
the
wel
fare
impa
ct o
f th
e U
K
priv
atiz
atio
n pr
ogra
m 1
979-
1997
. Con
side
rs th
e im
pact
on
five
type
s of
age
nts:
fir
ms,
em
ploy
ees,
sh
areh
olde
rs, c
onsu
mer
s an
d ta
xpay
ers.
Con
clud
es th
at p
riva
tizat
ion
has
mod
est e
ffec
ts o
n ef
fici
ency
of
prod
uctio
n an
d co
nsum
ptio
n, b
ut h
as im
port
ant e
ffec
ts o
n di
stri
butio
n of
inco
me
and
wea
lth.
A
ckno
wle
dges
fis
cal b
enef
its, l
ower
pri
ces
in m
ost a
reas
, pro
duct
ivit
y gr
owth
, but
as
sert
s th
ese
wou
ld h
ave
been
ach
ieve
d un
der
cont
inue
d st
ate
owne
rshi
p (d
ue to
ex
trap
olat
ion
of e
xist
ing
tren
ds).
Cal
cula
te th
at, a
t bes
t, th
e N
PV
of
the
wel
fare
cha
nge
for
each
Bri
tish
con
sum
er is
less
than
£1,
000,
and
wou
ld b
e lo
wer
if d
istr
ibut
iona
l is
sues
acc
ount
ed f
or.
Dum
ontie
r an
d L
auri
n (2
002)
Inve
stig
ate
the
valu
e th
at is
cre
ated
or
lost
dur
ing
the
stat
e ow
ners
hip
peri
od f
or e
ach
firm
nat
iona
lized
du
ring
198
2 an
d th
en r
e-pr
ivat
ized
bet
wee
n 19
86 a
nd
1995
. The
n te
sts
whe
ther
pri
vatiz
atio
n im
prov
es
perf
orm
ance
ove
r th
at a
chie
ved
duri
ng p
ost-
1982
na
tiona
lize
d pe
riod
. 46
com
pani
es (
39 b
anks
and
fiv
e in
dust
rial
fir
ms)
wer
e na
tiona
lize
d an
d th
en r
e-pr
ivat
ized
.
Find
that
gov
ernm
ent c
reat
ed v
alue
in n
atio
nali
zed
firm
s, b
ut s
tate
and
taxp
ayer
s di
d no
t ben
efit
bec
ause
of
prem
ium
pai
d to
sha
reho
lder
s up
on n
atio
nali
zati
on (
20%
) an
d un
derp
rici
ng o
f IP
O a
t pri
vati
zatio
n. F
inan
cial
and
ope
ratin
g pe
rfor
man
ce o
f co
mpa
nies
impr
oved
dur
ing
nati
onal
izat
ion
phas
e, th
en im
prov
ed e
ven
mor
e af
ter
priv
atiz
atio
n. P
rofi
ts a
nd s
ales
incr
ease
d af
ter
priv
atiz
atio
n, w
hile
eff
icie
ncy
impr
oved
ov
er a
ll th
ree
peri
ods.
Em
ploy
men
t fel
l dur
ing
natio
naliz
ed p
erio
d, b
ut in
crea
sed
(due
to
hig
her
sale
s) a
fter
pri
vatiz
atio
n. C
apita
l spe
ndin
g hi
ghes
t dur
ing
natio
naliz
ed
peri
od, d
ue to
gov
ernm
ent s
ubsi
dies
. Lev
erag
e de
clin
ed d
urin
g na
tiona
lized
per
iod,
bu
t inc
reas
ed a
fter
pri
vatiz
atio
n. D
ivid
ends
dec
line
duri
ng n
atio
naliz
ed p
erio
d, b
ut
incr
ease
aft
er p
riva
tizat
ion.
Saa
l and
P
arke
r (2
003)
Exa
min
e th
e pr
oduc
tivit
y an
d pr
ice
perf
orm
ance
of
the
priv
atiz
ed w
ater
and
sew
erag
e co
mpa
nies
of
Eng
land
an
d W
ales
aft
er th
e in
dust
ry is
pri
vati
zed
and
a ne
w
regu
lato
ry r
egim
e im
pose
d in
198
9. E
xam
ines
join
t im
pact
of
priv
atiz
atio
n an
d ne
w e
cono
mic
reg
ulat
ory
envi
ronm
ent o
n pe
rfor
man
ce.
Find
no
sign
ific
ant e
vide
nce
that
pro
duct
ivit
y gr
owth
, mea
sure
d by
gro
wth
in T
FP, i
s im
prov
ed b
y pr
ivat
izat
ion—
desp
ite r
educ
tions
in la
bor
usag
e. A
lso
find
that
incr
ease
s in
out
put p
rice
s ha
ve o
utst
ripp
ed in
crea
sed
inpu
t pri
ces,
lead
ing
to s
igni
fica
ntly
hig
her
econ
omic
pro
fits
aft
er p
riva
tizat
ion.
Tab
le 3
. Sum
mar
y of
Em
piri
cal S
tudi
es o
f P
riva
tiza
tion
in L
atin
Am
eric
a
Stud
y Sa
mpl
e de
scri
ptio
n, s
tudy
per
iod,
and
met
hodo
logy
Su
mm
ary
of e
mpi
rica
l fin
ding
s an
d co
nclu
sion
s
Ram
amur
ti (1
996)
Su
rvey
s st
udie
s of
fou
r te
leco
m, t
wo
airl
ine,
and
one
toll-
road
pri
vatiz
atio
n pr
ogra
ms
in L
atin
Am
eric
a du
ring
per
iod
1987
-199
1. A
lso
disc
usse
s po
liti
cal e
cono
mic
issu
es a
nd
met
hods
use
d to
ove
rcom
e bu
reau
crat
ic a
nd id
eolo
gica
l op
posi
tion
to d
ives
titu
re.
Con
clud
es p
riva
tizat
ion
very
pos
itive
for
tele
com
s, p
artl
y du
e to
sco
pe f
or
tech
nolo
gy, c
apita
l inv
estm
ent,
and
attr
activ
enes
s of
off
er te
rms.
Muc
h le
ss
scop
e fo
r pr
oduc
tivit
y im
prov
emen
ts f
or a
irlin
es a
nd r
oads
, and
littl
e im
prov
emen
t obs
erve
d.
Ram
amur
ti (1
997)
E
xam
ines
res
truc
turi
ng a
nd p
riva
tizat
ion
of F
erro
cari
lla
Arg
enti
nos,
the
nati
onal
rai
lroa
d, in
199
0. T
ests
whe
ther
pr
oduc
tivit
y, e
mpl
oym
ent,
and
need
for
ope
ratin
g su
bsid
ies
(equ
al to
1%
of
GD
P in
199
0) c
hang
e si
gnif
ican
tly
afte
r di
vest
itur
e.
Doc
umen
ts a
370
% im
prov
emen
t in
labo
r pr
oduc
tivit
y an
d a
78.7
% d
eclin
e in
em
ploy
men
t (fr
om 9
2,00
0 to
19,
682)
. Ser
vice
s w
ere
expa
nded
and
im
prov
ed, a
nd d
eliv
ered
at l
ower
cos
t to
cons
umer
s. N
eed
for
oper
atin
g su
bsid
ies
larg
ely
elim
inat
ed.
La
Por
ta a
nd
Lóp
ez-d
e-Si
lane
s (1
999)
Tes
ts w
heth
er p
erfo
rman
ce o
f 21
8 SO
Es
priv
atiz
ed th
roug
h Ju
ne 1
992
impr
oves
aft
er d
ives
tmen
t. C
ompa
res
perf
orm
ance
wit
h in
dust
ry-m
atch
ed f
irm
s, a
nd s
plits
im
prov
emen
ts d
ocum
ente
d be
twee
n in
dust
ry a
nd f
irm
-sp
ecif
ic in
flue
nces
.
Out
put o
f pr
ivat
ized
fir
ms
incr
ease
d 54
.3%
, whi
le e
mpl
oym
ent d
eclin
ed b
y ha
lf (
thou
gh w
ages
for
rem
aini
ng w
orke
rs in
crea
sed)
. Fir
ms
achi
eved
a 2
4 pe
rcen
tage
poi
nt in
crea
se in
ope
ratin
g pr
ofita
bilit
y, e
lim
inat
ing
need
for
su
bsid
ies
equa
l to
12.7
% o
f G
DP
. Hig
her
prod
uct p
rice
s ex
plai
n 5%
of
impr
ovem
ent;
tran
sfer
s fr
om la
id-o
ff w
orke
rs, 3
1%, a
nd in
cent
ive-
rela
ted
prod
uctiv
ity
gain
s ac
coun
t for
rem
aini
ng 6
4%.
Pam
bo a
nd
Ram
irez
(20
01)
Per
form
s ex
pos
t mea
suri
ng a
nd e
cono
met
ric
anal
ysis
of
30
larg
e C
olom
bian
man
ufac
turi
ng f
irm
s an
d 33
pow
er
gene
ratio
n pl
ants
pri
vatiz
ed d
urin
g 19
93-1
998
peri
od.
Em
ploy
bot
h pa
nel d
ata
regr
essi
on a
naly
sis
and
MN
R
mat
ched
pre
vs
post
-pri
vati
zati
on te
sts.
Pan
el d
ata
anal
ysis
fin
ds v
ery
posi
tive
resu
lts f
or p
riva
tized
man
ufac
turi
ng
firm
s. T
otal
fac
tor
prod
uctiv
ity
indi
ces
incr
ease
fro
m 0
.27
to 0
.50
poin
ts,
whi
le p
rofi
t rat
es in
crea
se b
y 1.
2 pe
rcen
tage
poi
nts.
Pro
duct
ive
effi
cien
cy in
po
wer
pro
duct
ion
not s
yste
mat
ical
ly r
elat
ed to
ow
ners
hip
chan
ges,
onc
e ot
her
fact
ors
acco
unte
d fo
r.
Gal
iani
, Ger
tler
and
Scha
rgro
dsky
(2
001)
Exa
min
es th
e im
pact
of
priv
atiz
ing
wat
er s
ervi
ces
on th
e m
orta
lity
of y
oung
chi
ldre
n in
Arg
enti
na. B
etw
een
1991
an
d 20
00, 3
0% o
f A
rgen
tina
’s p
ublic
wat
er c
ompa
nies
co
veri
ng 6
0% o
f th
e po
pula
tion
wer
e pr
ivat
ized
. Est
imat
e im
pact
of
priv
atiz
atio
n on
chi
ld m
orta
lity
usin
g th
ree
diff
eren
t mea
sure
s.
All
thre
e m
easu
res
show
that
chi
ld m
orta
lity
fel
l 5 to
8 p
erce
nt in
are
as th
at
priv
atiz
ed th
eir
wat
er s
ervi
ces.
Inc
reas
e in
acc
ess
to a
nd q
uali
ty o
f w
ater
ca
used
the
redu
ctio
n in
mor
tali
ty. I
nves
tmen
t inc
reas
ed, s
ervi
ce p
rovi
sion
be
cam
e m
ore
effi
cien
t and
qua
lity
impr
oved
. The
num
ber
of p
eopl
e co
nnec
ted
to th
e ne
twor
k in
crea
sed
dram
atic
ally
, but
pri
ces
did
not.
Est
ache
(20
02)
Ask
s w
heth
er A
rgen
tina
’s 1
990s
uti
liti
es p
riva
tiza
tion
pr
ogra
m w
as a
cur
e or
a d
isea
se. C
erta
inly
, the
pr
ivat
izat
ions
of
Arg
enti
na’s
ele
ctri
city
, gas
, wat
er a
nd
He
find
s th
at p
riva
tizat
ion,
per
se,
was
qui
te s
ucce
ssfu
l: it
rai
sed
sign
ific
ant
reve
nues
for
the
stat
e an
d th
e ne
w p
riva
te o
pera
tors
incr
ease
d ef
fici
ency
and
se
rvic
e le
vels
sig
nifi
cant
ly—
wit
hout
sig
nifi
cant
ly r
aisi
ng th
e ra
tes
they
sani
tatio
n an
d te
leco
mm
unic
atio
ns u
tiliti
es a
re to
day
the
obje
ct o
f in
tens
e an
ger
wit
hin
the
coun
try,
but
Est
ache
at
tem
pts
to d
eter
min
e w
heth
er th
is a
nger
is a
ppro
pria
te. H
e fi
rst n
otes
that
pri
vatiz
atio
n oc
curr
ed ju
st b
efor
e th
e co
untr
y w
as g
ripp
ed b
y a
mas
sive
pol
itica
l and
eco
nom
ic
colla
pse
and
he tr
ies
to s
epar
ate
the
impa
ct o
f pr
ivat
izat
ion
from
the
over
whe
lmin
g im
pact
of
the
colla
pse.
char
ged.
The
rat
es c
harg
ed c
onsu
mer
s, h
owev
er, i
ncre
ased
sig
nifi
cant
ly,
sinc
e th
e go
vern
men
t exp
loite
d th
e ne
w o
wne
rshi
p st
ruct
ure
to im
pose
in
dire
ct ta
xes
that
it c
ould
not
impo
se th
roug
h di
rect
levi
es. O
nce
the
econ
omic
cri
sis
bega
n, g
over
nmen
t act
ions
dis
crim
inat
ed a
gain
st th
e pr
ivat
ized
com
pani
es a
nd f
orei
gn o
pera
tors
wer
e vi
lifi
ed a
s ex
ploi
ters
whe
n th
ey tr
ied
to r
aise
fee
s in
line
wit
h in
flat
ion
and
deva
luat
ion.
Bir
ch a
nd H
aar
(200
0)
A d
escr
ipti
ve s
tudy
of
the
priv
atiz
atio
n ex
peri
ence
in th
e la
st tw
o de
cade
s in
Arg
enti
na, B
razi
l, C
hile
, Col
ombi
a,
Mex
ico,
Per
u, V
enez
uela
and
som
e C
arib
bean
cou
ntri
es.
The
aut
hors
fin
d si
zeab
le e
ffec
ts o
f pr
ivat
izat
ion
on th
e m
acro
econ
omic
co
nditi
ons
(bot
h in
the
shor
t and
long
run
). T
hey
also
sho
w a
pos
itive
eff
ect
of p
riva
tizat
ion
on p
rodu
ctiv
ity
and
a ne
gati
ve e
ffec
t on
empl
oym
ent.
Chi
sari
, Est
ache
an
d R
omer
o (1
999)
The
stu
dy a
sses
ses
mac
roec
onom
ic a
nd d
istr
ibut
iona
l ef
fect
s of
pri
vati
zati
on in
Arg
enti
na’s
gas
, ele
ctri
city
, te
leco
mm
unic
atio
ns, a
nd w
ater
sec
tors
. It u
ses
a co
mpu
tabl
e ge
nera
l equ
ilibr
ium
mod
el.
The
stu
dy c
oncl
udes
that
eff
ecti
ve r
egul
atio
n tr
ansl
ates
into
ann
ual g
ains
of
abou
t 1.2
5 bi
llion
of
GD
P. P
riva
tizat
ion
cann
ot b
e bl
amed
for
incr
ease
d un
empl
oym
ent a
s it
may
be
due
to in
effe
ctiv
e re
gula
tion.
Cho
ng a
nd
Sanc
hez
(200
3)
A d
etai
led
anal
ysis
of
the
cont
ract
ual a
rran
gem
ents
of
priv
atiz
atio
ns a
nd c
once
ssio
ns in
infr
astr
uctu
re. I
t cov
ers
four
cou
ntri
es: B
razi
l, C
hile
, Col
ombi
a an
d P
eru.
It c
oncl
udes
that
cle
ar, h
omog
eneo
us, t
rans
pare
nt a
nd c
redi
ble
inst
itutio
nal
proc
esse
s du
ring
pri
vatiz
atio
n yi
eld
posi
tive
outc
omes
.
Cla
rke
and
Cul
l (2
001)
T
his
stud
y us
es e
vide
nce
from
the
priv
atiz
atio
n pr
ogra
m o
f pr
ovin
cial
ban
ks in
Arg
enti
na d
urin
g th
e 19
90s.
It t
ests
ec
onom
etri
call
y ho
w p
oliti
cal c
onst
rain
ts a
ffec
t tr
ansa
ctio
ns d
urin
g ba
nk p
riva
tizat
ion.
It f
inds
that
pro
vinc
es w
ith
high
fis
cal d
efic
its
wer
e w
illin
g to
, fir
st, a
ccep
t la
yoff
s; a
nd s
econ
d, to
gua
rant
ee a
larg
er p
art o
f th
e pr
ivat
ized
ban
k’s
port
folio
in r
etur
n fo
r a
high
er s
ale
pric
e.
Gal
al, J
ones
, T
ando
n, a
nd
Vog
elsa
ng
(199
4)
It c
ompa
res
post
-pri
vatiz
atio
n pe
rfor
man
ce o
f 12
larg
e fi
rms
from
Chi
le a
nd M
exic
o. T
he c
ompa
nies
cov
ered
are
m
ostl
y ai
rlin
es a
nd r
egul
ated
util
itie
s.
Thi
s st
udy
find
s ne
t wel
fare
gai
ns in
11
of 1
2 ca
ses
cove
red.
Gai
ns a
re o
n av
erag
e eq
ual t
o 26
per
cent
of
the
firm
s’ p
re-d
ives
titu
re s
ales
. It
fin
ds n
o ca
se w
here
wor
kers
wer
e m
ade
wor
se o
ff, a
nd 3
cas
es in
whi
ch w
orke
rs'
cond
itio
ns im
prov
ed.
Hac
hett
e an
d L
uder
s (1
994)
T
his
stud
y an
alyz
es th
e di
ffer
ence
in 1
0 pe
rfor
man
ce
indi
cato
rs o
f 14
4 pr
ivat
e, p
ublic
and
pri
vatiz
ed f
irm
s in
C
hile
dur
ing
the
peri
od f
rom
197
4–19
87.
It f
inds
no
sign
ific
ant d
iffe
renc
es in
beh
avio
r am
ong
publ
ic, p
riva
te a
nd
priv
atiz
ed f
irm
s th
at o
pera
te u
nder
sim
ilar
set
s of
rul
es a
nd r
egul
atio
ns.
Pet
razz
ini a
nd
Cla
rk (
1996
)
Usi
ng I
nter
natio
nal T
elec
omm
unic
atio
ns U
nion
dat
a th
roug
h 19
94, i
t tes
ts w
heth
er d
ereg
ulat
ion
and
priv
atiz
atio
n im
pact
the
leve
l and
gro
wth
of
tele
dens
ity,
pr
ices
, ser
vice
qua
lity
and
em
ploy
men
t. T
he s
ampl
e co
vers
26
dev
elop
ing
coun
trie
s, in
clud
ing
som
e L
atin
Am
eric
an
Der
egul
atio
n an
d pr
ivat
izat
ion
are
both
ass
ocia
ted
wit
h si
gnif
ican
t im
prov
emen
ts in
the
leve
l and
gro
wth
of
tele
dens
ity,
but
hav
e no
con
sist
ent
impa
ct o
n th
e qu
alit
y of
ser
vice
. Der
egul
atio
n is
ass
ocia
ted
wit
h lo
wer
pri
ces
and
incr
ease
d em
ploy
men
t; pr
ivat
izat
ion
has
the
oppo
site
eff
ect.
natio
ns.
Pin
heir
o (1
996)
It
ana
lyze
s th
e pe
rfor
man
ce o
f 50
for
mer
Bra
zili
an S
OE
s be
fore
and
aft
er p
riva
tizat
ion.
It u
ses
data
up
unti
l 199
4.
The
var
iabl
es u
sed
are
net s
ales
, net
pro
fits
, net
ass
ets,
in
vest
men
t, em
ploy
men
t and
inde
bted
ness
.
The
stu
dy c
oncl
udes
that
pri
vati
zati
on h
as im
prov
ed th
e pe
rfor
man
ce o
f th
e fi
rms.
It s
how
s th
at th
e nu
ll hy
poth
esis
of
no c
hang
e in
beh
avio
r is
rej
ecte
d fo
r th
e pr
oduc
tion,
eff
icie
ncy,
pro
fita
bilit
y an
d in
vest
men
t var
iabl
es. I
t fin
ds
a si
gnif
ican
t neg
ativ
e im
pact
on
empl
oym
ent.
Ros
(19
99)
U
ses
ITU
dat
a an
d pa
nel d
ata
regr
essi
ons
to e
xam
ine
the
effe
cts
of p
riva
tizat
ion
and
com
petit
ion
on n
etw
ork
expa
nsio
n an
d ef
fici
ency
. The
stu
dy c
over
s 11
0 co
untr
ies
duri
ng th
e 19
86–1
995
peri
od.
Cou
ntri
es w
ith
at le
ast 5
0 pe
rcen
t of
priv
ate
owne
rshi
p in
the
mai
n te
leco
m
firm
hav
e si
gnif
ican
tly
high
er te
lede
nsit
y le
vels
and
gro
wth
rat
es. B
oth
priv
atiz
atio
n an
d co
mpe
titio
n in
crea
se e
ffic
ienc
y. H
owev
er, o
nly
priv
atiz
atio
n is
pos
itive
ly a
ssoc
iate
d w
ith
netw
ork
expa
nsio
n.
San
chez
and
C
oron
a (1
993)
U
ses
a de
scri
ptiv
e ca
se-s
tudy
app
roac
h to
ana
lyze
the
priv
atiz
atio
n ex
peri
ence
s of
Arg
enti
na, C
hile
, Col
ombi
a an
d M
exic
o. I
t foc
uses
on
the
prep
arat
ory
mea
sure
s ta
ken
prio
r to
pri
vatiz
atio
n; o
n va
luat
ion,
sal
e m
echa
nism
s,
regu
lati
on a
nd s
uper
visi
on, a
nd o
n th
e fi
scal
and
m
acro
econ
omic
impa
ct o
f pr
ivat
izat
ion.
The
aut
hors
fin
d gr
eat d
iffe
renc
es in
the
effe
cts
of p
riva
tiza
tion
in th
e co
untr
ies
cove
red
by th
e st
udy.
The
y co
nclu
de th
at f
irm
s, in
stitu
tions
and
re
gula
tion
s ne
ed s
uffi
cien
t tim
e to
pre
pare
for
the
priv
atiz
atio
n pr
oces
s to
be
succ
essf
ul.
Tru
jillo
, Mar
tin,
Est
ache
, and
C
ampo
s (2
002)
Thi
s st
udy
uses
a s
ampl
e of
21
Lat
in A
mer
ican
cou
ntri
es
cove
ring
fro
m 1
985
to 1
998.
It u
ses
pool
ed a
nd p
anel
dat
a w
ith
fixe
d an
d ra
ndom
eff
ects
to e
xam
ine
the
mac
roec
onom
ic e
ffec
ts o
f pr
ivat
e se
ctor
par
ticip
atio
n in
in
fras
truc
ture
.
The
aut
hors
fin
d th
at p
riva
te s
ecto
r in
volv
emen
t in
util
ities
and
tran
spor
t hav
e m
inim
al p
ositi
ve e
ffec
ts o
n G
DP
. The
re is
cro
wdi
ng o
ut o
f pr
ivat
e in
vest
men
t, pr
ivat
e pa
rtic
ipat
ion
redu
ces
recu
rren
t exp
endi
ture
s ex
cept
in
tran
spor
t whe
re it
has
the
oppo
site
eff
ect.
The
net
eff
ect o
n th
e pu
blic
sec
tor
acco
unt i
s un
cert
ain.
Wal
lste
n (2
001)
A
naly
ses
the
effe
ct o
f te
leco
mm
unic
atio
n re
form
s. I
t ex
plor
es th
e im
pact
of
priv
atiz
atio
n, c
ompe
titio
n, a
nd
regu
lati
on o
n te
leco
m f
irm
s' p
erfo
rman
ce. T
his
stud
y co
vers
30
Afr
ican
and
Lat
in A
mer
ican
cou
ntri
es d
urin
g th
e 19
84-1
997
peri
od.
It in
dica
tes
that
com
petit
ion
is s
igni
fica
ntly
ass
ocia
ted
wit
h in
crea
ses
in p
er
capi
ta a
cces
s to
tele
com
mun
icat
ion
serv
ices
and
wit
h de
crea
ses
in it
s co
sts.
P
riva
tizat
ion
is h
elpf
ul o
nly
if c
oupl
ed w
ith
effe
ctiv
e, in
depe
nden
t reg
ulat
ion.
T
he s
tudy
con
clud
es th
at c
ompe
titio
n co
mbi
ned
wit
h pr
ivat
izat
ion
is b
est.
Pri
vatiz
ing
a m
onop
oly
wit
hout
reg
ulat
ory
refo
rms
shou
ld b
e av
oide
d.
Tab
le 4
. Sum
mar
y of
Em
piri
cal S
tudi
es o
f P
riva
tiza
tion
in t
he T
rans
itio
n E
cono
mie
s of
Cen
tral
and
Eas
tern
Eur
ope
Stud
y Sa
mpl
e de
scri
ptio
n, s
tudy
per
iod,
and
met
hodo
logy
Su
mm
ary
of e
mpi
rica
l fin
ding
s an
d co
nclu
sion
s
Poh
l, A
nder
son,
C
laes
sens
, and
D
jank
ov (
1997
)
Com
pare
s th
e ex
tent
of
rest
ruct
urin
g ac
hiev
ed b
y ov
er 6
,300
pr
ivat
e an
d st
ate-
owne
d fi
rms
in s
even
eas
tern
Eur
opea
n co
untr
ies
duri
ng 1
992-
1995
. Use
s si
x m
easu
res
to e
xam
ine
whi
ch r
estr
uctu
ring
str
ateg
ies
impr
ove
perf
orm
ance
the
mos
t.
Pri
vatiz
atio
n dr
amat
ical
ly in
crea
ses
rest
ruct
urin
g li
keli
hood
and
su
cces
s. F
irm
pri
vatiz
ed f
or 4
yea
rs w
ill in
crea
se p
rodu
ctiv
ity
3-5
tim
es
mor
e th
an a
sim
ilar
SOE
. Litt
le d
iffe
renc
e in
per
form
ance
bas
ed o
n m
etho
d of
pri
vatiz
atio
n, b
ut o
wne
rshi
p &
fin
anci
ng e
ffec
ts im
pact
re
stru
ctur
ing.
Fryd
man
, Gra
y,
Hes
sel a
nd
Rap
aczy
nski
(1
999)
Com
pare
s th
e pe
rfor
man
ce o
f pr
ivat
ized
and
sta
te-o
wne
d fi
rms
in th
e tr
ansi
tion
eco
nom
ies
of C
entr
al E
urop
e, a
nd a
sks
the
ques
tion
“whe
n do
es p
riva
tizat
ion
wor
k?”
Exa
min
es in
flue
nce
of
owne
rshi
p st
ruct
ure
on p
erfo
rman
ce u
sing
a s
ampl
e of
90
stat
e-ow
ned
and
128
priv
atiz
ed c
ompa
nies
in th
e C
zech
Rep
ubli
c,
Hun
gary
and
Pol
and.
Em
ploy
pan
el d
ata
regr
essi
on m
etho
ds to
is
olat
e ow
ners
hip
effe
cts.
Pri
vatiz
atio
n “w
orks
,” b
ut o
nly
whe
n fi
rm is
con
trol
led
by o
utsi
de
owne
rs (
othe
r th
an m
anag
ers
or e
mpl
oyee
s). P
riva
tizat
ion
adds
ove
r 18
pe
rcen
tage
poi
nts
to th
e an
nual
gro
wth
rat
e of
a f
irm
sol
d to
a d
omes
tic
fina
ncia
l com
pany
, and
12
perc
enta
ge p
oint
s w
hen
sold
to a
for
eign
bu
yer.
Pri
vatiz
atio
n to
an
outs
ide
owne
r al
so a
dds
abou
t 9 p
erce
ntag
e po
ints
to p
rodu
ctiv
ity
grow
th. F
urth
er, g
ain
does
not
com
e at
the
expe
nse
of h
ighe
r un
empl
oym
ent;
insi
der
cont
rolle
d fi
rms
are
muc
h le
ss li
kely
to r
estr
uctu
re, b
ut o
utsi
der-
cont
rolle
d fi
rms
grow
fas
ter.
Sh
ows
the
impo
rtan
ce o
f en
trep
rene
ursh
ip in
rev
ivin
g sa
les
grow
th.
Ber
g,
Bor
ensz
tein
, Sa
hay
and
Zet
telm
eyer
(1
999)
Usi
ng m
acro
econ
omic
dat
a fr
om 2
6 tr
ansi
tion
coun
trie
s fo
r 19
90-1
996,
exa
min
es r
elat
ive
role
s of
mac
roec
onom
ic v
aria
bles
, st
ruct
ural
pol
icie
s, a
nd in
itial
con
ditio
ns in
exp
lain
ing
the
larg
e ob
serv
ed d
iffe
renc
es in
out
put p
erfo
rman
ce a
fter
tran
sitio
n be
gan.
Res
ults
poi
nt to
the
pree
min
ence
of
stru
ctur
al r
efor
ms
over
bot
h in
itia
l co
nditi
ons
and
mac
roec
onom
ic v
aria
bles
in e
xpla
inin
g cr
oss-
coun
try
diff
eren
ces
in p
erfo
rman
ce a
nd th
e ti
min
g of
rec
over
y fr
om th
e sh
arp
rece
ssio
n th
at h
it ev
ery
tran
siti
on e
cono
my
in th
e ea
rly
1990
s.
Fryd
man
, Gra
y,
Hes
sel a
nd
Rap
aczy
nski
(2
000)
Exa
min
es w
heth
er th
e im
posi
tion
of
hard
bud
get c
onst
rain
ts is
al
one
suff
icie
nt to
impr
ove
corp
orat
e pe
rfor
man
ce in
the
Cze
ch
Rep
ublic
, Hun
gary
and
Pol
and.
Em
ploy
s a
sam
ple
of 2
16 f
irm
s,
split
bet
wee
n st
ate-
owne
d (3
1%),
pri
vatiz
ed (
43%
), a
nd p
riva
te
(26%
) fi
rms.
Fin
ds p
riva
tiza
tion
alo
ne a
dds
near
ly 1
0 pe
rcen
tage
poi
nts
to th
e re
venu
e gr
owth
of
a fi
rm s
old
to o
utsi
de o
wne
rs. M
ost i
mpo
rtan
t, fi
nds
that
the
thre
at o
f ha
rd b
udge
t con
stra
ints
for
poo
rly
perf
orm
ing
SOE
s fa
lters
, sin
ce g
over
nmen
ts a
re u
nwill
ing
to a
llow
thes
e fi
rms
to f
ail.
The
br
unt o
f S
OE
s’ lo
wer
cre
ditw
orth
ines
s fa
lls
on s
tate
cre
dito
rs.
Fryd
man
, Hes
sel
and
Rap
aczy
nski
(2
000)
Exa
min
es w
heth
er p
riva
tized
Cen
tral
Eur
opea
n fi
rms
cont
rolle
d by
out
side
inve
stor
s ar
e m
ore
entr
epre
neur
ial—
in te
rms
of a
bilit
y to
incr
ease
rev
enue
s—th
an f
irm
s co
ntro
lled
by
insi
ders
or
the
stat
e. S
tudy
em
ploy
s su
rvey
dat
a fr
om a
sam
ple
of 5
06
man
ufac
turi
ng f
irm
s in
the
Cze
ch R
epub
lic,
Hun
gary
and
P
olan
d.
Doc
umen
ts th
at a
ll s
tate
and
pri
vati
zed
firm
s en
gage
in s
imil
ar ty
pes
of
rest
ruct
urin
g, b
ut th
at p
rodu
ct r
estr
uctu
ring
by
firm
s ow
ned
by o
utsi
de
inve
stor
s is
sig
nifi
cant
ly m
ore
effe
ctiv
e, in
term
s of
rev
enue
gen
erat
ion,
th
an b
y fi
rms
wit
h ot
her
type
s of
ow
ners
hip.
Con
clud
es th
e m
ore
entr
epre
neur
ial b
ehav
ior
of o
utsi
der-
owne
d fi
rms
is d
ue to
ince
ntiv
e ef
fect
s, r
athe
r th
an h
uman
cap
ital
eff
ects
, of
priv
atiz
atio
n—sp
ecif
ical
ly
grea
ter
read
ines
s to
take
ris
ks.
Zin
nes,
Eila
t and
Sa
chs
(200
1)
Em
ploy
s a
uniq
ue p
anel
dat
aset
of
mac
roec
onom
ic, o
wne
rshi
p st
ruct
ure,
and
indi
cato
r va
riab
les
mea
suri
ng th
e de
pth
and
brea
dth
of r
efor
m a
nd p
riva
tizat
ion
for
24 tr
ansi
tion
coun
trie
s to
de
term
ine
whe
ther
“ch
ange
of
owne
rshi
p” (
priv
atiz
atio
n) a
lone
is
enou
gh to
pro
mot
e im
prov
ed e
cono
mic
per
form
ance
ove
r th
e pe
riod
199
0-98
, or
whe
ther
“de
ep p
riva
tizat
ion”
invo
lvin
g im
prov
ed c
orpo
rate
gov
erna
nce,
enh
ance
d pr
uden
tial
reg
ulat
ion
and
hard
enin
g of
bud
get c
onst
rain
ts is
als
o re
quir
ed. D
evel
op a
n O
BC
A in
dica
tor
vari
able
for
eac
h co
untr
y m
easu
ring
the
brea
dth
and
dept
h of
ref
orm
s, a
nd in
clud
es th
is v
aria
ble
in r
egre
ssio
ns.
Use
fou
r m
easu
res
of e
cono
my-
wid
e m
acro
econ
omic
pe
rfor
man
ce a
s de
pend
ent v
aria
bles
.
Reg
ardl
ess
of p
erfo
rman
ce m
easu
re e
mpl
oyed
, fin
ds th
at e
cono
mic
pe
rfor
man
ce g
ains
com
e on
ly f
rom
dee
p pr
ivat
izat
ion—
mea
ning
that
ch
ange
of
title
ref
orm
s on
ly y
ield
eco
nom
ic g
ains
aft
er k
ey in
stit
utio
nal
and
agen
cy-r
elat
ed r
efor
ms
have
exc
eede
d ce
rtai
n th
resh
old
leve
ls. B
y th
emse
lves
, cha
nge
of ti
tle r
efor
ms
neve
r ha
ve a
sig
nifi
cant
impa
ct o
n pe
rfor
man
ce, b
ut th
e hi
gher
the
OB
CA
leve
l a c
ount
ry h
as, t
he m
ore
posi
tive
is th
e im
pact
of
an in
crea
se in
cha
nge
of ti
tle
on e
cono
mic
pe
rfor
man
ce. W
hile
ow
ners
hip
mat
ters
, ins
titut
ions
mat
ter
just
as
muc
h.
Car
lin, F
ries
, S
chaf
fer
and
Seab
righ
t (20
01)
Use
s da
ta f
rom
a 1
999
surv
ey o
f 33
05 f
irm
s in
25
tran
siti
on
coun
trie
s to
exa
min
e th
e fa
ctor
s th
at p
rom
ote
rest
ruct
urin
g by
fi
rms
and
enha
nce
subs
eque
nt p
erfo
rman
ce—
as m
easu
red
by
grow
th in
sal
es a
nd in
sal
es p
er e
mpl
oyee
ove
r a
3-ye
ar p
erio
d.
Surv
ey in
clud
es a
bout
125
com
pani
es f
rom
eac
h of
the
25
coun
trie
s, w
ith
larg
er s
ampl
es f
rom
Pol
and
and
Ukr
aine
(20
0+
firm
s) a
nd R
ussi
a (5
00+
fir
ms)
. Jus
t ove
r on
e-ha
lf w
ere
new
ly-
esta
blis
hed
firm
s, 8
% w
ere
priv
atiz
ed to
insi
ders
, 22%
pri
vatiz
ed
to o
utsi
ders
and
16%
rem
aine
d st
ate-
owne
d.
Find
s th
at c
ompe
titio
n ha
s an
impo
rtan
t and
non
-mon
oton
ic e
ffec
t on
the
grow
th o
f sa
les
and
labo
r pr
oduc
tivit
y, w
ith
perf
orm
ance
impr
ovin
g m
ore
for
firm
s fa
cing
1-3
com
peti
tors
than
for
mon
opol
ists
(on
e-fo
urth
of
SO
Es
face
no
com
peti
tion
for
thei
r m
ain
prod
ucts
in th
eir
dom
esti
c m
arke
ts)
or f
irm
s fa
cing
man
y co
mpe
titor
s. C
ontr
olli
ng f
or o
ther
fa
ctor
s, f
ind
no s
igni
fica
nt r
elat
ions
hip
betw
een
priv
atiz
atio
n an
d pe
rfor
man
ce. N
ewly
cre
ated
fir
ms
gene
rall
y ou
t-pe
rfor
m a
ll o
ther
ca
tego
ries
. Old
fir
ms
(pri
vati
zed
and
SO
Es)
are
muc
h m
ore
like
ly to
cut
em
ploy
men
t tha
n ne
w e
ntra
nts,
but
aut
hors
fin
d so
me
evid
ence
that
pr
ivat
e fi
rms
(new
ent
rant
s an
d pr
ivat
ized
) ar
e m
ore
like
ly to
eng
age
in
new
pro
duct
dev
elop
men
t. O
vera
ll, f
ind
com
peti
tion
to b
e a
mor
e po
wer
ful i
nflu
ence
on
perf
orm
ance
than
ow
ners
hip,
per
se.
Ang
eluc
ci,
Est
rin,
Kon
ings
an
d Z
olki
ewsk
i (2
001)
Ana
lyze
s th
e ef
fect
of
owne
rshi
p an
d co
mpe
titi
on o
n fi
rm
perf
orm
ance
, mea
sure
d by
tota
l fac
tor
prod
uctiv
ity
(TFP
), in
th
ree
tran
siti
on e
cono
mie
s fo
r ye
ars
1994
-199
8. U
ses
repo
rted
co
mpa
ny a
ccou
nts
data
for
199
4 an
d 19
98 f
or 1
7,57
0 P
olis
h, a
nd
for
1997
-98
for
1,50
0 B
ulga
rian
and
2,0
47 R
oman
ian
com
pani
es.
Tes
ts w
heth
er p
riva
te f
orei
gn-o
wne
d fi
rms
outp
erfo
rm p
riva
te
dom
esti
c co
mpa
nies
, and
whe
ther
thes
e bo
th o
utpe
rfor
m S
OE
s.
Fin
ds th
at (
1) c
ompe
titi
ve p
ress
ure
(mea
sure
d by
mar
ket s
truc
ture
) is
as
soci
ated
wit
h hi
gher
pro
duct
ivit
y in
all
thre
e co
untr
ies;
(2)
incr
ease
d im
port
pen
etra
tion
is p
ositi
vely
ass
ocia
ted
wit
h pe
rfor
man
ce in
Pol
and,
bu
t neg
ativ
ely
in B
ulga
ria
and
Rom
ania
; (3)
com
petit
ive
pres
sure
has
st
rong
er e
ffec
ts in
pri
vate
fir
ms
and
priv
atiz
atio
n is
ass
ocia
ted
wit
h hi
gher
per
form
ance
in m
ore
com
peti
tive
sec
tors
; (4)
pri
vati
zati
on is
as
soci
ated
wit
h be
tter
fir
m p
erfo
rman
ce a
nd p
riva
tize
d fi
rms
out-
perf
orm
SO
Es
in a
ll th
ree
coun
trie
s. O
vera
ll, f
ind
ther
e ar
e co
mpl
emen
tari
ties
betw
een
com
petit
ive
pres
sure
and
ow
ners
hip.
Cla
esse
ns a
nd
Exa
min
es c
hang
es in
the
perf
orm
ance
of
6,35
4 pr
ivat
ized
and
Fi
nds
that
pri
vatiz
atio
n is
ass
ocia
ted
wit
h si
gnif
ican
tly
incr
ease
d sa
les
Dja
nkov
(20
02)
stat
e-ow
ned
firm
s in
sev
en tr
ansi
tion
eco
nom
ies
over
the
1991
-95
per
iod,
and
test
whe
ther
pri
vatiz
atio
n im
prov
es p
erfo
rman
ce
(as
mea
sure
d by
incr
ease
d sa
les
and
labo
r pr
oduc
tivi
ty).
Sam
ple
incl
udes
all
man
ufac
turi
ng f
irm
s th
at a
re r
egis
tere
d as
sta
te-
owne
d in
199
1 an
d ha
ve m
ore
than
25
empl
oyee
s. H
ave
full
bala
nce
shee
t and
inco
me
stat
emen
ts f
or 1
992-
95, a
nd c
onst
ruct
pa
nel d
ata
show
ing
evol
utio
n of
ow
ners
hip
over
per
iod.
and
prod
uctiv
ity
grow
th a
nd, t
o a
less
er e
xten
t, w
ith f
ewer
job
loss
es.
In s
ix o
f se
ven
coun
trie
s, p
riva
tized
fir
ms
show
hig
her
sale
s gr
owth
or
smal
ler
decl
ines
in s
ales
than
SO
Es,
and
pri
vati
zed
firm
s re
duce
thei
r sa
les
forc
es b
y an
ave
rage
6.1
1% v
ersu
s 7.
42%
for
SO
Es
(sig
nifi
cant
di
ffer
ence
). P
ositi
ve e
ffec
t of
priv
atiz
atio
n is
str
onge
r in
eco
nom
ic
mag
nitu
de a
nd s
tati
stic
al s
igni
fica
nce
as th
e ti
me
elap
sed
sinc
e pr
ivat
izat
ion
incr
ease
s.
Cla
esse
ns,
Dja
nkov
, and
P
ohl (
1997
)
Exa
min
e de
term
inan
ts o
f pe
rfor
man
ce im
prov
emen
ts f
or s
ampl
e of
706
Cze
ch f
irm
s pr
ivat
ized
dur
ing
1992
-199
5. U
sing
Tob
ins-
Q,
test
s w
heth
er c
once
ntra
ted
owne
rshi
p st
ruct
ure
or p
rese
nce
of
outs
ide
mon
itor
(ban
k or
inve
stm
ent f
und)
impr
oves
Q m
ore
than
di
sper
sed
owne
rshi
p.
Doc
umen
t tha
t pri
vati
zed
firm
s do
pro
sper
, pri
mar
ily
beca
use
of th
e co
ncen
trat
ed o
wne
rshi
p st
ruct
ure
that
res
ults
. Fin
d th
e m
ore
conc
entr
ated
the
post
-pri
vati
zati
on o
wne
rshi
p st
ruct
ure
the
high
er is
th
e fi
rm’s
pro
fita
bili
ty a
nd m
arke
t val
uatio
n. L
arge
sta
kes
owne
d by
ba
nk-s
pons
ored
fun
ds a
nd s
trat
egic
inve
stor
s ar
e pa
rtic
ular
ly v
alue
-en
hanc
ing
Wei
ss a
nd
Nik
itin
(199
8)
Ana
lyze
the
effe
cts
of o
wne
rshi
p by
inve
stm
ent f
unds
on
the
perf
orm
ance
of
125
priv
atiz
ed C
zech
fir
ms
duri
ng th
e pe
riod
19
93-1
995.
Ass
ess
thes
e ef
fect
s by
mea
suri
ng th
e re
latio
nshi
p be
twee
n ch
ange
s in
per
form
ance
and
cha
nges
in th
e co
mpo
siti
on
of o
wne
rshi
p at
the
star
t of
priv
atiz
atio
n. U
se r
obus
t est
imat
ion
tech
niqu
es, i
n ad
ditio
n to
OL
S, s
ince
dat
a st
rong
ly r
ejec
t no
rmal
ity.
Find
that
ow
ners
hip
conc
entr
atio
n an
d co
mpo
sitio
n jo
intl
y af
fect
pe
rfor
man
ce o
f pr
ivat
ized
fir
ms.
Con
cent
ratio
n of
ow
ners
hip
in th
e ha
nds
of a
larg
e sh
areh
olde
r, o
ther
than
an
inve
stm
ent f
und
or
com
pany
, is
asso
ciat
ed w
ith
sign
ific
ant p
erfo
rman
ce im
prov
emen
ts
(for
all
mea
sure
s of
per
form
ance
). C
once
ntra
ted
owne
rshi
p by
fun
ds
does
not
impr
ove
firm
per
form
ance
. Pre
lim
inar
y po
st-1
996
data
su
gges
ts th
at c
hang
es in
inve
stm
ent f
und
legi
slat
ion
may
impr
ove
thei
r pe
rfor
man
ce.
Cla
esse
ns a
nd
Dja
nkov
(19
99a)
St
udy
the
effe
ct o
f m
anag
emen
t tur
nove
r on
cha
nges
in f
inan
cial
an
d op
erat
ing
perf
orm
ance
of
706
priv
atiz
ed C
zech
fir
ms
over
the
peri
od 1
993-
1997
. Exa
min
e ch
ange
s in
pro
fita
bili
ty a
nd la
bor
prod
uctiv
ity.
Find
that
the
appo
intm
ent o
f ne
w m
anag
ers
is a
ssoc
iate
d w
ith
sign
ific
ant i
mpr
ovem
ents
in p
rofi
t mar
gins
and
labo
r pr
oduc
tivit
y,
part
icul
arly
if th
e m
anag
ers
are
sele
cted
by
priv
ate
owne
rs. N
ew
man
ager
s ap
poin
ted
by th
e N
atio
nal P
rope
rty
Fund
als
o im
prov
e pe
rfor
man
ce, t
houg
h no
t by
as m
uch.
Cla
esse
ns a
nd
Dja
nkov
(19
99b)
E
xam
ine
the
rela
tion
ship
bet
wee
n ow
ners
hip
conc
entr
atio
n an
d co
rpor
ate
perf
orm
ance
for
706
pri
vati
zed
Cze
ch f
irm
s du
ring
the
peri
od 1
992-
1997
. Use
pro
fita
bili
ty a
nd la
bor
prod
ucti
vity
as
indi
cato
rs o
f co
rpor
ate
perf
orm
ance
.
Fin
ds th
at c
once
ntra
ted
owne
rshi
p is
ass
ocia
ted
wit
h hi
gher
pr
ofita
bilit
y an
d la
bor
prod
uctiv
ity.
Als
o fi
nd th
at f
orei
gn s
trat
egic
ow
ners
and
non
-ban
k-sp
onso
red
inve
stm
ent f
unds
impr
ove
perf
orm
ance
mor
e th
an b
ank-
spon
sore
d fu
nds.
Liz
al, S
inge
r,
Svej
nar
(200
0)
Exa
min
es th
e pe
rfor
man
ce e
ffec
ts o
f th
e w
ave
of b
reak
-ups
of
Cze
chsl
ovak
SO
Es
on th
e su
bseq
uent
per
form
ance
of
the
mas
ter
firm
and
the
spin
off
s. T
he r
egre
ssio
ns u
se d
ata
for
373
firm
s in
19
91 a
nd 2
62 f
irm
s in
199
2.
The
re w
as a
n im
med
iate
(in
199
1) p
osit
ive
effe
ct o
n th
e ef
fici
ency
and
pr
ofita
bilit
y of
sm
all a
nd m
ediu
m s
ize
firm
s (b
oth
mas
ter
and
spin
-of
fs)
and
nega
tive
for
the
larg
er f
irm
s. T
he r
esul
ts f
or 1
992
are
sim
ilar
but n
ot s
tati
stic
ally
sig
nifi
cant
.
Har
per
(200
1)
Exa
min
es th
e ef
fect
s of
pri
vati
zati
on o
n th
e fi
nanc
ial a
nd
oper
atin
g pe
rfor
man
ce o
f 17
4 fi
rms
priv
atiz
ed in
the
firs
t—an
d 38
0 fi
rms
dive
sted
in th
e se
cond
—w
ave
of th
e C
zech
Rep
ubli
c’s
vouc
her
priv
atiz
atio
ns o
f 19
92 a
nd 1
994.
Com
pare
s re
sult
s fo
r pr
ivat
ized
fir
ms
to th
ose
whi
ch r
emai
n st
ate-
owne
d. E
mpl
oys
Meg
gins
on, N
ash
and
van
Ran
denb
orgh
met
hodo
logy
and
va
riab
les
to m
easu
re c
hang
es.
Find
s th
at th
e fi
rst w
ave
of p
riva
tizat
ion
yiel
ds d
isap
poin
ting
resu
lts.
Rea
l sal
es, p
rofi
tabi
lity,
eff
icie
ncy
and
empl
oym
ent a
ll de
clin
ed
dram
atic
ally
(an
d si
gnif
ican
tly)
. How
ever
, sec
ond
wav
e fi
rms
expe
rien
ce s
igni
fica
nt in
crea
ses
in e
ffic
ienc
y an
d pr
ofita
bilit
y an
d th
e de
clin
e in
em
ploy
men
t—th
ough
stil
l sig
nifi
cant
—is
muc
h le
ss d
rast
ic
than
aft
er f
irst
wav
e (-
17%
vs
-41%
).
Liz
al a
nd
Svej
nar
(200
1)
Exa
min
e st
rate
gic
rest
ruct
urin
g an
d ne
w in
vest
men
t per
form
ance
of
4,0
00 C
zech
com
pani
es d
urin
g 19
92-1
998.
Dat
aset
incl
udes
ov
er 8
3,00
0 qu
arte
rly
obse
rvat
ions
. Dev
elop
and
test
a d
ynam
ic
mod
el o
f re
stru
ctur
ing
and
inve
stm
ent,
allo
win
g th
em to
exa
min
e se
para
ble
impa
ct o
f pr
ivat
e ve
rsus
pub
lic a
nd d
omes
tic v
ersu
s fo
reig
n ow
ners
hip
on r
estr
uctu
ring
, as
wel
l as
the
impo
rtan
ce o
f ac
cess
to c
redi
t and
a s
oft b
udge
t con
stra
int o
n fi
rm in
vest
men
t
Find
that
(1)
for
eign
ow
ned
com
pani
es in
vest
the
mos
t and
(d
omes
tica
lly
owne
d) c
oope
rativ
es th
e le
ast;
(2)
priv
ate
firm
s do
not
in
vest
mor
e th
an s
tate
-ow
ned
firm
s; (
30 c
oope
rativ
es a
nd s
mal
l fir
ms
are
cred
it r
atio
ned;
and
(4)
SO
Es
oper
ate
unde
r a
soft
bud
get
cons
trai
nt
Fidr
muc
and
Fi
drm
uc (
2001
) U
se a
sam
ple
of 1
78 C
zech
fir
ms
priv
atiz
ed d
urin
g fi
rst w
ave
of
vouc
her
priv
atiz
atio
n (1
992-
1994
) to
test
whe
ther
ow
ners
hip
chan
ge p
rom
oted
incr
ease
d ef
fici
ency
and
pro
fita
bilit
y. U
se M
NR
pr
e ve
rsus
pos
t-pr
ivat
izat
ion
com
pari
son
tech
niqu
es to
test
for
pe
rfor
man
ce c
hang
es
Find
that
eff
icie
ncy
and
prof
itab
ility
dec
lined
aft
er p
riva
tizat
ion,
and
th
at c
hang
es in
fir
ms’
ope
ratio
ns d
o no
t var
y si
gnif
ican
tly
by s
ize
or
owne
rshi
p—bu
t do
vary
by
indu
stry
type
, wit
h no
n-m
anuf
actu
ring
fi
rms
expe
rien
cing
mor
e po
siti
ve (
or le
ss n
egat
ive)
cha
nges
.
Liz
al a
nd
Svej
nar
(200
2)
Use
pan
el o
f ov
er 8
3,50
0 qu
arte
rly
obse
rvat
ions
fro
m 4
,000
m
ediu
m a
nd la
rge
Cze
ch c
ompa
nies
ove
r th
e 19
92-1
998
peri
od to
as
sess
the
effe
cts
of m
ass
priv
atiz
atio
n on
fir
m p
erfo
rman
ce.
Find
that
for
eign
ow
ners
una
mbi
guou
sly
impr
ove
long
-ter
m
perf
orm
ance
(m
easu
red
seve
ral w
ays,
incl
udin
g pr
ofits
and
in
vest
men
t) o
f pr
ivat
ized
com
pani
es, b
ut d
omes
tic o
wne
rs d
o no
t.
Koc
enda
and
Sv
ejna
r (2
002)
A
naly
ze th
e ef
fect
of
owne
rshi
p on
pos
t-pr
ivat
izat
ion
perf
orm
ance
us
ing
a da
tase
t of
2,52
9-2,
949
obse
rvat
ions
on
an u
nbal
ance
d pa
nel o
f 1,
371-
1,54
0 m
ediu
m a
nd la
rge
Cze
ch f
irm
s. d
efin
e si
x ca
tego
ries
of
owne
rs a
nd e
xam
ine
impa
ct o
f ea
ch.
Fin
d th
at c
once
ntra
ted
fore
ign
owne
rshi
p im
prov
es e
cono
mic
pe
rfor
man
ce, b
ut d
omes
tic p
riva
te o
wne
rshi
p do
es n
ot, r
elat
ive
to s
tate
fi
rms.
For
eign
-ow
ned
firm
s en
gage
in s
trat
egic
res
truc
turi
ng b
y in
crea
sing
sal
es a
nd p
rofi
ts, w
hile
dom
estic
fir
ms
redu
ce s
ales
and
la
bor
cost
s w
itho
ut in
crea
sing
pro
fits
. Ow
ners
hip
conc
entr
atio
n ge
nera
lly
asso
ciat
ed w
ith
impr
oved
per
form
ance
. Ove
rall
, con
clud
e th
at s
tate
ow
ners
hip
play
s a
muc
h m
ore
econ
omic
ally
and
soc
iall
y be
nefi
cial
rol
e in
this
tran
sitio
n ec
onom
y th
an th
eory
wou
ld p
redi
ct.
Cul
l, M
ates
ova
and
Shir
ley
(200
2)
Exa
min
e th
e in
cent
ive
of m
anag
ers
of v
ouch
er-p
riva
tize
d C
zech
co
mpa
nies
to “
tunn
el”
(str
ip a
sset
s ou
t of
com
pani
es a
t the
ex
pens
e of
out
side
sha
reho
lder
s) a
nd “
loot
” th
eir
com
pani
es.
Loo
ting
occ
urs
whe
n fi
rms
face
a s
oft b
udge
t con
stra
int a
nd
Con
trol
ling
for
siz
e, in
dust
ry, c
apita
l int
ensi
ty a
nd in
itial
leve
rage
, fin
d th
at v
ouch
er-p
riva
tize
d JS
Cs
perf
orm
sig
nifi
cant
ly w
orse
than
fir
ms
wit
h co
ncen
trat
ed o
wne
rshi
p th
at a
re p
urch
ased
for
cas
h. I
nves
tmen
t fu
nd-c
ontr
olle
d JS
Cs
unde
r-pe
rfor
m a
ll ot
her
firm
s, in
clud
ing
othe
r
man
ager
s ar
e ab
le to
bor
row
hea
vily
, ext
ract
fun
ds f
rom
the
firm
, an
d th
en d
efau
lt on
the
debt
with
out p
enal
ty.
Em
ploy
a d
atas
et
wit
h 1,
017
obse
rvat
ions
fro
m 3
92 c
ompa
nies
spr
ead
near
ly e
venl
y be
twee
n 19
94-9
6. H
alf
of th
e fi
rms
are
vouc
her-
priv
atiz
ed jo
int
stoc
k co
mpa
nies
(JS
Cs)
whi
le h
alf
are
lim
ited
liabi
lity
com
pani
es
(LL
Cs)
.
JSC
s. F
und-
cont
rolle
d JS
Cs
also
take
on
liabi
litie
s at
a m
uch
fast
er
rate
than
oth
er f
irm
s, in
dica
ting
they
are
ope
rati
ng u
nder
a s
oft b
udge
t co
nstr
aint
. Tho
ugh
not a
ble
to m
easu
re d
irec
tly,
evi
denc
e in
dire
ctly
sh
ows
that
loot
ing
is a
wid
espr
ead
occu
rren
ce f
or m
any
JSC
s.
Dyc
k (1
997)
D
evel
ops
and
test
s an
adv
erse
sel
ectio
n m
odel
to e
xpla
in th
e T
reuh
and’
s ro
le in
res
truc
turi
ng a
nd p
riva
tizin
g ea
ster
n G
erm
any’
s st
ate-
owne
d fi
rms.
In
less
than
fiv
e ye
ars,
the
Tre
uhan
d pr
ivat
ized
mor
e th
an 1
3,80
0 fi
rms
and
part
s of
fir
ms
and,
uni
quel
y, h
ad th
e re
sour
ces
to p
ay f
or r
estr
uctu
ring
itse
lf—
but a
lmos
t nev
er c
hose
to d
o so
. Ins
tead
, it e
mph
asiz
ed s
peed
and
sa
les
to e
xist
ing
wes
tern
fir
ms
over
giv
eaw
ays
and
sale
s to
cap
ital
fund
s. P
aper
rat
iona
lizes
Tre
uhan
d’s
appr
oach
.
Doc
umen
ts th
at p
riva
tize
d ea
st G
erm
an f
irm
s ar
e m
uch
mor
e li
kely
to
tran
sfer
wes
tern
(us
uall
y G
erm
an)
man
ager
s in
to k
ey p
osit
ions
than
ar
e co
mpa
nies
that
rem
ain
stat
e-ow
ned.
Als
o fi
nds
that
Tre
uhan
d em
phas
izes
sal
es o
pen
to a
ll bu
yers
rat
her
than
fav
orin
g ea
ster
n G
erm
ans.
Pri
ncip
al m
essa
ge: p
riva
tizat
ion
prog
ram
s m
ust c
aref
ully
co
nsid
er w
hen
and
how
to a
ffec
t man
ager
ial r
epla
cem
ent i
n pr
ivat
ized
co
mpa
nies
. Pla
ns o
pen
to w
este
rn b
uyer
s, a
nd w
hich
all
ow
man
agem
ent c
hang
e, a
re m
ost l
ikel
y to
impr
ove
firm
per
form
ance
.
Gle
nner
ster
(2
003)
U
sing
a p
anel
dat
aset
on
470
form
erly
sta
te-o
wne
d fi
rms
in th
e fo
rmer
Yug
osla
v R
epub
lic o
f M
aced
onia
(FS
RM
) fo
r 19
96-1
999,
ex
amin
es w
heth
er p
riva
tizat
ion
incr
ease
s pr
ofita
bilit
y of
div
este
d co
mpa
nies
. Use
s a
fixe
d ef
fect
s pa
nel d
ata
regr
essi
on to
add
ress
se
lect
ion
bias
in b
oth
the
tim
ing
and
met
hod
of p
riva
tizat
ion.
Find
s w
eak
but s
igni
fica
nt e
vide
nce
that
pri
vatiz
atio
n ca
n yi
eld
bene
fits
eve
n w
ith
pred
omin
antl
y in
side
r sa
les
and
in a
n en
viro
nmen
t of
wea
k co
rpor
ate
gove
rnan
ce. O
n av
erag
e, p
riva
tiza
tion
lead
s to
a
30%
incr
ease
in r
even
ues
and
cost
s, a
16%
incr
ease
in th
e nu
mbe
r of
w
orke
rs e
mpl
oyed
, and
a $
1,20
0 in
crea
se in
pro
fits
per
wor
ker.
Fir
ms
sold
to o
utsi
ders
and
thos
e w
ith
mor
e co
ncen
trat
ed o
wne
rshi
p ex
pand
m
ore
than
oth
er, s
imila
r fi
rms
afte
r pr
ivat
izat
ion.
Em
ploy
ee b
uy-o
uts
perf
orm
rel
ativ
ely
poor
ly. A
lso
find
that
lack
of
acce
ss to
cap
ital
is a
n im
port
ant r
easo
n w
hy in
side
r pr
ivat
izat
ions
per
form
poo
rly,
sin
ce
thos
e fi
rms
whe
re n
ew o
wne
rs b
ring
in n
ew c
apit
al s
ee p
arti
cula
rly
high
gro
wth
rat
es a
fter
pri
vati
zatio
n.
Gro
sfel
d an
d T
ress
el (
2002
) E
xam
ine
whe
ther
com
peti
tion
and
cor
pora
te g
over
nanc
e ar
e su
bsti
tute
s or
com
plem
ents
wit
h re
spec
t to
prom
otin
g pe
rfor
man
ce im
prov
emen
ts in
Pol
and’
s tr
ansi
tion.
Use
the
avai
labl
e da
ta f
or a
ll 20
0 no
n-fi
nanc
ial f
irm
s li
sted
on
the
War
saw
St
ock
Exc
hang
e fr
om 1
991-
1998
. Fir
st s
tudy
the
sepa
rate
eff
ects
of
com
petit
ion
and
owne
rshi
p co
ncen
trat
ion
on p
rodu
ctiv
ity
grow
th a
t the
fir
m le
vel,
then
exa
min
e th
eir
inte
ract
ion.
Find
that
pro
duct
mar
ket c
ompe
titio
n ha
s a
posi
tive
and
sign
ific
ant
impa
ct o
n pe
rfor
man
ce. T
he e
ffec
t of
owne
rshi
p co
ncen
trat
ion,
whi
ch
is q
uite
hig
h in
Pol
and,
turn
s ou
t to
be U
-sha
ped.
Fir
ms
wit
h di
sper
sed
owne
rshi
p an
d th
ose
whe
re o
ne s
hare
hold
er o
wns
mor
e th
an 5
0% o
f vo
ting
shar
es h
ave
high
er p
rodu
ctiv
ity
grow
th th
an th
ose
wit
h in
term
edia
te le
vels
of
owne
rshi
p co
ncen
trat
ion.
Com
peti
tive
pre
ssur
e do
es n
ot a
ffec
t new
ly c
reat
ed f
irm
s, b
ut d
oes
sign
ific
antl
y im
prov
e pe
rfor
man
ce o
f pr
ivat
ized
com
pani
es. P
rese
nce
of a
larg
e fo
reig
n ow
ner
incr
ease
s pr
oduc
tivit
y gr
owth
sig
nifi
cant
ly. C
oncl
ude
that
goo
d co
rpor
ate
gove
rnan
ce a
nd c
ompe
titiv
e pr
essu
res
are
com
plem
ents
.
Cor
icel
li an
d D
jank
ov (
2001
) Id
enti
fy th
e pr
esen
ce o
f so
ft b
udge
t con
stra
ints
and
ana
lyze
thei
r im
pact
on
ente
rpri
se r
estr
uctu
ring
in R
oman
ia d
urin
g th
e in
itia
l tr
ansi
tion
peri
od. E
mpl
oy a
sim
ple
anal
ytic
al m
odel
and
a s
ampl
e of
4,4
29 e
nter
pris
es w
ith
data
fro
m 1
992-
1995
to te
st w
heth
er
hard
enin
g bu
dget
con
stra
ints
pro
mot
es b
enef
icia
l res
truc
turi
ng
and
new
inve
stm
ent o
r w
heth
er a
cces
s to
ext
erna
l fin
anci
ng is
re
quir
ed to
pro
mot
e ne
w in
vest
men
t.
Find
that
har
d bu
dget
con
stra
ints
(H
BC
s) d
o pr
omot
e pa
ssiv
e re
stru
ctur
ing,
in th
e fo
rm o
f la
bor
shed
ding
, but
not
new
inve
stm
ent.
Act
ive
rest
ruct
urin
g re
quir
es a
cces
s to
ext
erna
l fin
anci
ng. T
ight
ened
ba
nk c
redi
t can
indu
ce H
BC
s an
d ra
ise
ente
rpri
se e
ffic
ienc
y in
the
shor
t-ru
n, b
ut a
t the
cos
t of
curt
ailin
g in
vest
men
t.
Ear
le a
nd
Tel
egdy
(20
02)
Exa
min
e im
pact
of
priv
atiz
atio
n—an
d m
etho
d of
pri
vatiz
atio
n—on
fir
m p
erfo
rman
ce in
Rom
ania
ove
r th
e pe
riod
199
2-19
99.
Em
ploy
a d
atas
et o
f 2,
354
firm
s ow
ned
by th
e St
ate
Ow
ners
hip
Fund
(SO
F) in
199
2, a
nd tr
ace
evol
utio
n of
ow
ners
hip
over
nex
t si
x ye
ars;
mos
t of
thes
e (7
7%)
still
hav
e so
me
stat
e ow
ners
hip
(50.
9% m
edia
n) in
199
8.
Sho
w c
onsi
sten
tly
posi
tive,
hig
hly
sign
ific
ant e
ffec
ts o
f pr
ivat
e ow
ners
hip
on la
bor
prod
uctiv
ity
grow
th, w
ith
the
poin
t est
imat
e im
plyi
ng a
n in
crem
enta
l 1.0
to 1
.7 p
erce
ntag
e po
int g
row
th in
pr
oduc
tivit
y fo
r a
10%
ris
e in
pri
vate
sha
reho
ldin
g. I
nsid
er tr
ansf
ers
and
mas
s pr
ivat
izat
ions
hav
e sm
alle
r, b
ut s
till
sign
ific
antl
y po
sitiv
e ef
fect
s.
Sm
ith,
Cin
and
V
odop
ivec
(1
997)
Usi
ng a
sam
ple
wit
h 22
,735
fir
m-y
ears
of
data
dra
wn
from
per
iod
of “
spon
tane
ous
priv
atiz
atio
n” in
Slo
veni
a (1
989-
1992
), e
xam
ine
the
impa
ct o
f fo
reig
n an
d em
ploy
ee o
wne
rshi
p on
fir
m
perf
orm
ance
.
Fin
d th
at a
per
cent
age
poin
t inc
reas
e in
for
eign
ow
ners
hip
is
asso
ciat
ed w
ith
a 3.
9% in
crea
se in
val
ue-a
dded
, and
for
em
ploy
ee
owne
rshi
p w
ith
a 1.
4% in
crea
se. A
lso
find
that
fir
ms
wit
h hi
gher
re
venu
es, p
rofi
ts, a
nd e
xpor
ts a
re m
ore
like
ly to
exh
ibit
fore
ign
and
empl
oyee
ow
ners
hip.
Tab
le 5
. Sum
mar
y of
Em
piri
cal S
tudi
es o
f P
riva
tiza
tion
in R
ussi
a an
d F
orm
er S
ovie
t R
epub
lics
Stud
y Sa
mpl
e de
scri
ptio
n, s
tudy
per
iod,
and
met
hodo
logy
Su
mm
ary
of e
mpi
rica
l fin
ding
s an
d co
nclu
sion
s
Dja
nkov
(1
999a
) In
vest
igat
es th
e re
latio
n be
twee
n ow
ners
hip
stru
ctur
e an
d en
terp
rise
res
truc
turi
ng f
or 9
60 f
irm
s pr
ivat
ized
in s
ix n
ewly
in
depe
nden
t sta
tes
betw
een
1995
and
199
7. E
mpl
oy s
urve
y da
ta c
olle
cted
by
the
Wor
ld B
ank
in la
te 1
997
from
Geo
rgia
, K
azak
hsta
n, K
yrgy
z R
epub
lic,
Mol
dova
, Rus
sia
and
Ukr
aine
.
Show
that
for
eign
ow
ners
hip
is p
ositi
vely
ass
ocia
ted
wit
h en
terp
rise
re
stru
ctur
ing
at h
igh
owne
rshi
p le
vels
(>
30%
), w
hile
man
ager
ial o
wne
rshi
p is
po
sitiv
ely
rela
ted
to r
estr
uctu
ring
at l
ow (
<10
%)
or h
igh
leve
ls, b
ut n
egat
ive
at
inte
rmed
iate
leve
ls. E
mpl
oyee
ow
ners
hip
is b
enef
icia
l to
labo
r pr
oduc
tivit
y at
lo
w o
wne
rshi
p le
vels
, but
is o
ther
wis
e in
sign
ific
ant.
Dja
nkov
(1
999b
) U
sing
sam
e su
rvey
dat
a as
in D
jank
ov (
1999
a) a
bove
, stu
dies
ef
fect
s of
dif
fere
nt p
riva
tizat
ion
mod
aliti
es o
n re
stru
ctur
ing
proc
ess
in G
eorg
ia (
92 f
irm
s) a
nd M
oldo
va (
149
firm
s).
Geo
rgia
em
ploy
s vo
uche
r pr
ivat
izat
ion,
whi
le th
e m
ajor
ity
of
Mol
dova
n fi
rms
are
acqu
ired
by
inve
stm
ent f
unds
—an
d nu
mer
ous
othe
rs a
re s
old
to m
anag
ers
for
cash
.
Pri
vatiz
atio
n th
roug
h m
anag
emen
t buy
-out
s is
pos
itive
ly a
ssoc
iate
d w
ith
ente
rpri
se r
estr
uctu
ring
, whi
le v
ouch
er p
riva
tized
fir
ms
do n
ot r
estr
uctu
re m
ore
rapi
dly
than
fir
ms
that
rem
ain
stat
e-ow
ned.
Im
plie
s th
at m
anag
ers
who
gai
n ow
ners
hip
for
free
may
hav
e le
ss in
cent
ive
to r
estr
uctu
re, a
s th
eir
inco
me
is n
ot
sole
ly b
ased
on
the
succ
ess
of th
e en
terp
rise
.
Ear
le (
1998
) In
vest
igat
es th
e im
pact
of
owne
rshi
p st
ruct
ure
on th
e (l
abor
) pr
oduc
tivit
y of
Rus
sian
indu
stri
al f
irm
s. U
sing
199
4 su
rvey
da
ta, e
xam
ines
dif
fere
ntia
l im
pact
of
insi
der,
out
side
r, a
nd
stat
e ow
ners
hip
on th
e pe
rfor
man
ce o
f 43
0 fi
rms-
-of
whi
ch
86 r
emai
n 10
0% s
tate
-ow
ned,
299
are
par
tially
pri
vatiz
ed,
and
45 a
re n
ewly
-cre
ated
. Adj
usts
em
piri
cal m
etho
ds to
ac
coun
t for
tend
ency
of
insi
ders
to c
laim
dom
inan
t ow
ners
hip
in th
e be
st f
irm
s be
ing
dive
sted
.
OL
S re
gres
sion
s sh
ow a
pos
itiv
e im
pact
of
priv
ate
(rel
ativ
e to
sta
te)
shar
e ow
ners
hip
on la
bor
prod
uctiv
ity,
wit
h th
is r
esul
t pri
mar
ily
due
to m
anag
eria
l ow
ners
hip.
Aft
er a
djus
ting
for
sele
ctio
n bi
as, h
owev
er, f
inds
that
onl
y ou
tsid
er
owne
rshi
p is
sig
nifi
cant
ly a
ssoc
iate
d w
ith
prod
uctiv
ity
impr
ovem
ents
. Str
esse
s th
at le
avin
g in
side
rs in
con
trol
of
firm
s—w
hile
pol
itica
lly
expe
dien
t—ha
s ve
ry
nega
tive
long
-ter
m im
plic
atio
ns f
or th
e re
stru
ctur
ing
of R
ussi
an in
dust
ry.
Ear
le a
nd
Est
rin
(199
8)
Usi
ng a
sam
ple
very
sim
ilar
to th
at u
sed
by E
arle
(19
98)
abov
e, e
xam
ine
whe
ther
pri
vatiz
atio
n, c
ompe
titio
n an
d th
e ha
rden
ing
of b
udge
t con
stra
ints
pla
y ef
fici
ency
-enh
anci
ng
role
s in
Rus
sia.
Fin
d a
10 p
erce
ntag
e po
int i
ncre
ase
in p
riva
te s
hare
ow
ners
hip
rais
es r
eal s
ales
pe
r em
ploy
ee b
y 3-
5%. S
ubsi
dies
(so
ft b
udge
t con
stra
ints
) re
duce
the
pace
of
rest
ruct
urin
g in
sta
te-o
wne
d fi
rms,
but
the
effe
ct is
sm
all a
nd o
ften
in
sign
ific
ant.
Jone
s an
d M
ygin
d (2
002)
Use
s fi
xed
effe
cts
prod
uctio
n fu
nctio
n m
odel
s es
tim
ated
on
a ra
ndom
sam
ple
of 6
60 E
ston
ian
firm
s w
ith
data
fro
m 1
993
to
1997
. Pri
vatiz
atio
n in
Est
onia
cre
ated
a w
idel
y va
ried
ow
ners
hip
stru
ctur
es, a
nd s
tudy
att
empt
s to
est
imat
e re
latio
nshi
p be
twee
n ow
ners
hip
and
prod
uctiv
e ef
fici
ency
.
Find
that
, rel
ativ
e to
sta
te o
wne
rshi
p, (
1) p
riva
te o
wne
rshi
p is
13-
22%
mor
e ef
fici
ent,
(2)
all t
ypes
of
priv
ate
owne
rshi
p ar
e m
ore
prod
uctiv
e, th
ough
co
ncen
trat
ed m
anag
eria
l ow
ners
hip
has
the
bigg
est e
ffec
t (21
-32%
im
prov
emen
t), a
nd o
wne
rshi
p by
dom
estic
out
side
rs th
e sm
alle
st (
0-15
%),
wit
h ow
ners
hip
by f
orei
gner
s (2
1-32
%)
and
empl
oyee
s (2
4-25
%)
yiel
ding
in
term
edia
te le
vels
of
impr
ovem
ent.
Dja
nkov
an
d N
enov
a U
se d
ata
for
over
6,6
00 K
azak
h en
terp
rise
s du
ring
199
6-99
to
exam
ine
“why
did
pri
vati
zati
on f
ail i
n K
azak
hsta
n?”
Try
ing
Find
that
new
ly c
reat
ed (
de n
ovo)
pri
vate
ent
erpr
ises
, est
abli
shed
aft
er 1
992,
pe
rfor
m m
arke
dly
bette
r th
an p
riva
tized
fir
ms
or th
ose
that
rem
ain
SOE
s.
(200
0)
to e
xpla
in r
apid
dec
lines
in o
utpu
t for
all
sect
ors
exce
pt o
il an
d ga
s.
Pri
vatiz
ed f
irm
s pe
rfor
m a
s ba
dly
as, o
r w
orse
than
, SO
Es.
Pri
vatiz
atio
n fa
ils
to
impr
ove
perf
orm
ance
bec
ause
div
este
d fi
rms
are
used
as
shor
t-te
rm v
ehic
les
for
extr
acti
ng p
riva
te b
enef
its.
Gre
gori
an
(200
0)
Exa
min
es r
elat
ions
hip
betw
een
owne
rshi
p an
d op
erat
ing
perf
orm
ance
usi
ng a
dat
aset
of
5,30
0 sm
all,
med
ium
and
la
rge
Lit
huan
ian
com
pani
es w
ith d
ata
over
per
iod
1995
-199
7.
Per
form
ance
def
ined
as
incr
ease
d re
venu
es a
nd im
prov
ed
expo
rt p
erfo
rman
ce. A
lso
use
regr
essi
on a
naly
sis
to s
tudy
su
bsam
ple
of 6
18 c
ompa
nies
whi
ch a
re f
ully
sta
te-o
wne
d in
19
95; r
ough
ly h
alf
of th
ese
are
part
iall
y pr
ivat
ized
ove
r ne
xt
two
year
s.
Con
clud
e th
at p
riva
tiza
tion
has
brou
ght s
igni
fica
nt p
erfo
rman
ce im
prov
emen
ts
over
all.
Als
o fi
nd a
neg
ativ
e bi
as in
sel
ecti
ng f
irm
s fo
r pr
ivat
izat
ion;
onc
e th
is
acco
unte
d fo
r, p
erfo
rman
ce im
prov
emen
t is
even
mor
e dr
amat
ic (
ther
e is
a
nine
-fol
d in
crea
se in
the
coef
fici
ent o
n pr
ivat
e ow
ners
hip)
. Exp
ecte
d su
bsid
ies
cont
ribu
te n
egat
ivel
y to
per
form
ance
, but
stu
dy f
inds
no
sign
ific
ant i
mpa
ct
rega
rdin
g m
arke
t com
petit
ion.
And
erso
n,
Lee
and
M
urre
ll (2
000)
Exa
min
es e
ffec
ts o
f co
mpe
titio
n an
d ow
ners
hip
on th
e ef
fici
ency
of
new
ly p
riva
tized
fir
ms
usin
g a
sam
ple
211
Mon
golia
n co
mpa
nies
wit
h (s
urve
y-de
rive
d) o
wne
rshi
p da
ta
in 1
995.
Mon
golia
’s p
riva
tizat
ion
prog
ram
is im
plem
ente
d in
a
coun
try
lack
ing
the
basi
c in
stitu
tions
of
capi
tali
sm.
Find
s th
at c
ompe
titio
n ha
s qu
alita
tivel
y la
rge
effe
cts;
per
fect
ly c
ompe
titiv
e fi
rms
have
nea
rly
doub
le th
e ef
fici
ency
of
mon
opol
ies.
Ent
erpr
ises
wit
h re
sidu
al s
tate
ow
ners
hip
appe
ar to
be
mor
e ef
fici
ent t
han
othe
r en
terp
rise
s,
refl
ecti
ng a
n en
viro
nmen
t whe
re th
e go
vern
men
t is
pres
sure
d to
foc
us o
n ef
fici
ency
and
inst
itut
ions
gav
e lit
tle v
oice
to o
utsi
de o
wne
rs.
Est
rin
and
Ros
evea
r (1
999)
Use
a r
ando
m s
ampl
e of
150
Ukr
aini
an f
irm
s w
ith
data
fro
m
1996
to te
st th
e re
latio
nshi
p be
twee
n en
terp
rise
per
form
ance
an
d ow
ners
hip.
Exp
lore
whe
ther
pri
vatiz
atio
n yi
elds
im
prov
ed c
ompa
ny p
erfo
rman
ce a
nd w
heth
er s
peci
fic
owne
rshi
p fo
rms
lead
to d
iffe
rent
iate
d pe
rfor
man
ce a
t the
en
terp
rise
leve
l.
Find
that
pri
vati
zati
on, p
er s
e, is
not
sig
nifi
cant
ly a
ssoc
iate
d w
ith
impr
oved
pe
rfor
man
ce, a
nd f
ind
no b
enef
it to
out
side
(ve
rsus
insi
der)
ow
ners
hip.
Do
find
cl
ear
posi
tive
effe
cts
asso
ciat
ed w
ith
insi
der
owne
rshi
p. O
utsi
de o
wne
rs a
re
neve
r ab
le to
del
iver
per
form
ance
sup
erio
r to
SO
Es,
and
insi
der
owne
rshi
p
does
not
yie
ld a
bet
ter
prof
it pe
rfor
man
ce th
an in
non
-pri
vati
zed
com
pani
es.
And
reye
va
(200
1)
Exa
min
es e
mpi
rica
lly
the
resp
onsi
vene
ss o
f fi
rm p
erfo
rman
ce
to o
wne
rshi
p an
d m
arke
t str
uctu
res,
sec
tor
and
regi
onal
sp
ecif
icit
y, a
nd v
aryi
ng d
egre
es o
f so
ft b
udge
t con
stra
ints
. U
se a
pan
el o
f 52
4 m
ediu
m a
nd la
rge
firm
s w
ith
perf
orm
ance
da
ta f
or 1
996-
98.
Fin
d th
at f
irm
eff
icie
ncy
impr
oves
sig
nifi
cant
ly w
ith
priv
atiz
atio
n. A
lso
docu
men
t a s
igni
fica
nt in
flue
nce
of in
dust
ry a
ffili
atio
n an
d re
gion
al lo
catio
n in
sh
apin
g fi
rm p
erfo
rman
ce; m
ore
conc
entr
ated
mar
kets
per
form
bet
ter.
C
oncl
udes
that
a p
olic
y of
attr
actin
g st
rate
gic
inve
stor
s ca
pabl
e of
pus
hing
re
stru
ctur
ing
and
brin
ging
new
inve
stm
ent t
o pr
ivat
ized
fir
ms
shou
ld b
ecom
e a
prio
rity
for
pol
icy-
mak
ers.
Piv
ovar
sky
(200
1)
Usi
ng d
ata
on 3
76 m
ediu
m a
nd la
rge
Ukr
aini
an f
irm
s,
inve
stig
ate
rela
tions
hip
betw
een
owne
rshi
p co
ncen
trat
ion
and
ente
rpri
se p
erfo
rman
ce.
Find
that
ow
ners
hip
conc
entr
atio
n is
pos
itiv
ely
asso
ciat
ed w
ith
ente
rpri
se
perf
orm
ance
, and
that
con
cent
rate
d ow
ners
hip
by f
orei
gn c
ompa
nies
and
ban
ks
is a
ssoc
iate
d w
ith
bett
er p
erfo
rman
ce th
an c
once
ntra
ted
dom
esti
c ow
ners
hip.
C
oncl
udes
that
pri
vatiz
atio
n m
etho
d ha
s la
stin
g im
pact
on
owne
rshi
p st
ruct
ure;
pr
ivat
izat
ion
met
hods
that
gra
nt s
igni
fica
nt o
wne
rshi
p st
akes
to s
ingl
e pa
rtie
s ha
ve g
reat
er e
ffic
ienc
y ga
ins
than
met
hods
that
cre
ate
disp
erse
d ow
ners
hip.
Tab
le 5
. Sum
mar
y of
Rec
ent E
mpi
rica
l Stu
dies
Exa
min
ing
Whe
ther
the
Im
posi
tion
of
Har
d B
udge
t C
onst
rain
ts (
HB
C)
and
Impr
oved
Inc
enti
ves
for
Man
ager
s Im
prov
es C
orpo
rate
Per
form
ance
Stud
y Sa
mpl
e de
scri
ptio
n, s
tudy
per
iod,
and
met
hodo
logy
Su
mm
ary
of e
mpi
rica
l fin
ding
s an
d co
nclu
sion
s
Gro
ves,
Hon
g,
McM
illan
and
N
augh
ton
(199
4)
Usi
ng a
sam
ple
of d
ata
for
769
Chi
nese
sta
te-o
wne
d en
terp
rise
s ov
er th
e ye
ars
1980
-89,
exa
min
e th
e im
pact
of
deve
lopi
ng a
co
mpe
titi
ve m
anag
eria
l lab
or m
arke
t on
firm
per
form
ance
and
m
anag
emen
t pro
duct
ivit
y.
Find
that
new
pos
itive
and
neg
ativ
e in
cent
ives
wer
e ef
fect
ive
in
prom
otin
g im
prov
ed p
erfo
rman
ce, a
nd th
at m
anag
emen
t con
trac
ts w
ere
wid
ely
adop
ted
as p
art o
f re
form
pro
cess
. Poo
rly
perf
orm
ing
man
ager
s w
ere
mor
e li
kely
to b
e re
plac
ed, a
nd m
anag
eria
l pay
was
link
ed to
fir
m
sale
s an
d pr
ofit
s. O
utpu
t per
wor
ker
rose
67
perc
ent i
n re
al te
rms
betw
een
1980
and
198
9 fo
r sa
mpl
e fi
rms.
Com
peti
tion
impr
oves
pe
rfor
man
ce w
itho
ut o
wne
rshi
p ch
ange
s.
Fryd
man
, Gra
y,
Hes
sel a
nd
Rap
aczy
nski
(2
000)
Exa
min
e w
heth
er th
e im
posi
tion
of
hard
bud
get c
onst
rain
ts is
al
one
suff
icie
nt to
impr
ove
corp
orat
e pe
rfor
man
ce in
the
Cze
ch
Rep
ublic
, Hun
gary
and
Pol
and.
Em
ploy
s a
sam
ple
of 2
16 f
irm
s,
split
bet
wee
n st
ate-
owne
d (3
1%),
pri
vatiz
ed (
43%
), a
nd p
riva
te
(26%
) fi
rms.
Find
pri
vatiz
atio
n al
one
adde
d ne
arly
10
perc
enta
ge p
oint
s to
the
reve
nue
grow
th o
f a
firm
sol
d to
out
side
ow
ners
. Mos
t im
port
ant,
find
s th
at th
e th
reat
of
hard
bud
get c
onst
rain
ts f
or p
oorl
y pe
rfor
min
g SO
Es
falte
rs,
sinc
e go
vern
men
ts a
re u
nwil
ling
to a
llow
thes
e fi
rms
to f
ail.
The
bru
nt o
f SO
Es’
low
er c
redi
twor
thin
ess
falls
on
stat
e cr
edit
ors.
Pri
vati
zati
on
requ
ired
to im
prov
e pe
rfor
man
ce; t
hrea
t of
HB
C n
ot c
redi
ble.
Ber
tero
and
R
ondi
(20
00)
Em
ploy
ing
a sa
mpl
e of
150
Ita
lian
man
ufac
turi
ng S
OE
s, w
ith
1,27
8 fi
rm-y
ear
obse
rvat
ions
, exa
min
e w
heth
er im
posi
tion
of
a ha
rd b
udge
t con
stra
int c
an im
prov
e SO
E p
erfo
rman
ce. E
xplo
its
the
fact
that
fis
cal e
nvir
onm
ent b
ecam
e m
uch
tigh
ter
for
Ital
ian
stat
e en
terp
rise
s du
ring
the
late
198
0s.
Fin
d th
at th
e S
OE
fir
ms’
res
pons
e to
incr
ease
d de
bt d
urin
g th
e ha
rd
budg
et c
onst
rain
t per
iod,
198
8-93
, was
con
sist
ent w
ith
fina
ncia
l pr
essu
re, b
ut w
as n
ot d
urin
g th
e so
ft b
udge
t con
stra
int p
erio
d of
197
7-87
. Onl
y du
ring
the
late
r pe
riod
do
firm
s re
spon
d to
fin
anci
al p
ress
ure
by
incr
easi
ng T
FP a
nd r
educ
ing
empl
oym
ent.
Impo
sitio
n of
HB
C im
prov
es
perf
orm
ance
wit
hout
ow
ners
hip
chan
ge.
Tab
le 6
. Sum
mar
y of
Em
piri
cal S
tudi
es o
f P
riva
tiza
tion
in C
hina
Stud
y Sa
mpl
e de
scri
ptio
n, s
tudy
per
iod,
and
met
hodo
logy
Su
mm
ary
of e
mpi
rica
l fin
ding
s an
d co
nclu
sion
s
Sun
and
Ton
g (2
003)
E
valu
ates
the
perf
orm
ance
of
634
Chi
nese
SO
Es
list
ed
on s
tock
exc
hang
es d
urin
g th
e pe
riod
199
4-19
98. U
se
both
MN
R p
re-
vs. p
ost-
priv
atiz
atio
n co
mpa
riso
ns a
nd
pane
l dat
a re
gres
sion
met
hods
to e
xam
ine
whe
ther
pa
rtia
l div
estm
ent i
mpr
oves
fir
m’s
ear
ning
s, o
utpu
t, an
d ef
fici
ency
(re
al o
utpu
t per
em
ploy
ee).
Als
o ex
amin
e di
ffer
enti
al e
ffec
t of
stat
e an
d “l
egal
per
son”
sh
areh
oldi
ngs.
Usi
ng M
NR
met
hods
, fin
d si
gnif
ican
t im
prov
emen
ts in
ret
urn
on s
ales
and
the
leve
l of
real
ear
ning
s, r
eal s
ales
, and
em
ploy
ee p
rodu
ctiv
ity
afte
r pa
rtia
l pr
ivat
izat
ion.
Als
o fi
nd th
at m
ore
rece
ntly
pri
vati
zed
com
pani
es a
re o
f hi
gher
qu
alit
y—an
d pe
rfor
m b
ette
r af
ter
dive
stm
ent-
-tha
n do
thos
e di
vest
ed e
arlie
r.
Pan
el d
ata
regr
essi
ons
veri
fy b
asic
fin
ding
s th
at p
riva
tizat
ion
impr
oves
pe
rfor
man
ce, a
nd f
ind
that
dif
fere
nt o
wne
rshi
p st
ruct
ures
hav
e op
posi
te e
ffec
ts o
n fi
rm’s
per
form
ance
. Sta
te s
hare
hold
ings
hin
der
perf
orm
ance
, whi
le “
lega
l per
son”
sh
areh
oldi
ngs
prom
ote
impr
ovem
ents
.
Wei
, Var
ella
, D
’Sou
za a
nd
Has
san
(200
3)
Use
MN
R m
etho
ds to
test
whe
ther
per
form
ance
im
prov
es f
or 2
08 C
hine
se c
ompa
nies
par
tiall
y pr
ivat
ized
thro
ugh
publ
ic s
hare
off
erin
g be
twee
n 19
90
and
1997
.
Doc
umen
t sig
nifi
cant
impr
ovem
ents
in r
eal o
utpu
t, as
sets
and
sal
es, s
ales
ef
fici
ency
, the
leve
l of
real
pro
fits
and
leve
rage
. Fir
ms
in w
hich
mor
e th
an 5
0%
votin
g co
ntro
l is
conv
eyed
to p
riva
te in
vest
ors
impr
ove
perf
orm
ance
mor
e th
an d
o th
ose
that
rem
ain
stat
e co
ntro
lled
.
Tia
n (2
002)
E
xam
ines
the
owne
rshi
p an
d co
ntro
l str
uctu
re o
f 82
6 pa
rtia
lly
priv
atiz
ed c
ompa
nies
list
ed o
n C
hine
se s
tock
ex
chan
ges
from
199
4-19
98 a
nd te
sts
the
rela
tions
hip
betw
een
owne
rshi
p st
ruct
ure
and
firm
val
ue—
as
mea
sure
d by
Tob
in’s
q.
Find
that
gov
ernm
ent s
hare
hold
ing
rem
ain
very
larg
e in
par
tial
ly p
riva
tized
co
mpa
nies
, and
that
the
rela
tion
ship
bet
wee
n st
ate
hold
ings
and
fir
m v
alue
is U
-sh
aped
. Goi
ng f
rom
sta
te o
wne
rshi
p le
vels
of
0 to
30%
, inc
reas
ing
owne
rshi
p ca
uses
fir
m v
alue
to d
ecli
ne, b
ut a
fter
that
Tob
in’s
q in
crea
ses
wit
h in
crea
sing
st
ate
owne
rshi
p.
Jia,
Sun
and
T
ong
(200
2)
Exa
min
e w
heth
er p
riva
tizat
ion
thro
ugh
listi
ng o
f C
hine
se c
ompa
nies
in H
ong
Kon
g ca
uses
per
form
ance
to
impr
ove.
Use
s a
sam
ple
of 4
1 C
hine
se H
-sha
re S
IPs
from
199
3-98
. Use
MN
R a
nd p
oole
d re
gres
sion
pan
el
data
met
hodo
logy
.
Fin
d th
at r
eal n
et p
rofi
ts a
re u
ncha
nged
aft
er p
riva
tiza
tion
, and
that
ret
urn
on s
ales
de
clin
es s
igni
fica
ntly
. Out
put i
ncre
ases
and
leve
rage
dec
lines
sig
nifi
cant
ly.
Reg
ress
ions
sho
w th
at s
tate
ow
ners
hip
is n
egat
ivel
y re
late
d to
per
form
ance
. H-
shar
e ow
ners
hip
has
sign
ific
ant,
posi
tive
effe
ct o
n pe
rfor
man
ce.