Effects of Privatization and Ownership in Transition Economies
The paper evaluates the effects of privatization in the post-communist economies and China. In post-communist economies privatization to foreign owners results in a rapid improvement in performance of firms, while performance effects of privatizati...
| Main Authors: | , , , |
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| Format: | Policy Research Working Paper |
| Language: | English |
| Published: |
2012
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| Subjects: | |
| Online Access: | http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20090107093820 http://hdl.handle.net/10986/4009 |
| Summary: | The paper evaluates the effects of
privatization in the post-communist economies and China. In
post-communist economies privatization to foreign owners
results in a rapid improvement in performance of firms,
while performance effects of privatization to domestic
owners are less impressive and vary across regions,
coinciding with differences in policies and institutional
development. In China relatively more estimates suggest that
privatization to domestic owners improves the level of
performance. Concentrated private ownership has a stronger
positive effect on performance than dispersed ownership in
the post-communist economies, but foreign joint ventures
rather than wholly owned foreign firms have a positive
effect in China. Worker or collective ownership does not
have a negative effect. In the post-communist economies new
firms are equally or more efficient than firms privatized to
domestic owners, and foreign start-ups are more efficient
than domestic ones. Privatization is not associated with
lower employment. When accompanied by complementary reforms,
privatization has a positive effect on economic growth.
Three factors appear to drive the more positive effect of
privatization to foreign than domestic owners. Domestic
managers have more limited skills and access to world
markets, domestically privatized firms have been more
subject to tunneling and in some countries new large
shareholders artificially decreased performance. The
important policy implication is that privatization per se
does not guarantee improved performance, at least not in the
short- to medium-run. Type of private ownership, corporate
governance, access to know-how and markets, and the legal
and institutional system matter for firm performance. |
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