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

This paper estimates the effect of privatization on multifactor productivity (MFP) using comprehensive panel data on initially state-owned manufacturing firms in four economies. We exploit the data’s longitudinal dimension to control for pre-privatization selection and estimate long-run impacts. The estimates are robust to functional form, but sensitive to selection controls. Our preferred random growth estimates imply positive MFP effects of 15% in Romania, 8% in Hungary, and 2% in Ukraine, but a negative 3% effect in Russia. The foreign privatization effect is larger (18–35%) in all countries. Positive domestic effects appear immediately in Hungary, Romania, and Ukraine and continue growing thereafter, but only emerge 5 years after privatization in Russia.