Measuring the Causal Effect of Privatization on Firm Performance

Despite an apparent consensus in the literature that privatization leads to increased productivity and profitability of firms, the problem of endogeneity bias is profound and has been emphasized in a number of meta-analyses. We propose a new method to address the endogeneity bias and apply it to a universe of Polish medium and large firms over 1995-2009. Unlike some previous studies we find that improvement in firm performance is a rare phenomenon, which suggests that the endogeneity bias could have been indeed large.