Where Does Privatization Work? Understanding the Heterogeneity in Estimated Firm Performance Effects

Why do the reported effects of privatization on firm performance vary so much? This paper re-estimates these effects and tests potential explanations for heterogeneity using comprehensive, long-panel data for 70,000 firms in five East European economies. Estimated average effects are positive, about 5-12%, for measures of profitability, efficiency, and growth, but they vary across countries and time periods. Our analysis of heterogeneity in privatization effectiveness finds little systematic role for firm size, financial dependence, or technological complexity, but shows important variation by fraction privatized, ownership structure, firm quality, and the macroeconomic and institutional environment