How Does
Privatization Affect Efficiency, Productivity and
Technology Choice?: Evidence from Turkey
by
Cagla Okten
Bilkent University
Uncovering
the effects of privatization is difficult, because privatization of a particular
firm usually is not an accident. This paper tests the effects of privatization
on efficiency,
firm productivity and technology choice by using a rich panel data set of
privatized
cement firms from Turkey. Since all public cement firms were privatized and we
have
pre and post privatization data for all of them, we are able to avoid the
problem of
endogeneity associated with sample selection. In addition, panel nature of our
data allows
us to control for both firm and time specific effects. Our results indicate that
privatization
has a positive and significant effect on labor productivity and output while it
has a
negative and significant effect on per unit costs and prices. We also find that
privatized
firm switches to a more capital-intensive technology as capital and capital
labor ratio
both increase and employment decreases following privatization. These results
provide
support for an agency model of public ownership presented in Shleifer and Vishny
(1994).