The Impact of Privatization on Labor Productivity in Transition Economies and the Turkic Republics

We examine the relationship between various indicators of privatization and labor productivity. By exploiting a panel data set covering the years between 1989 and 2008 and 19 transition economies and using three labor productivity and six privatization indicators, we test the hypothesis that privatization contributes to increase in productivity in transition economies. We identified a statistically significant positive correlation between privatization and labor productivity. Our results suggest that privatization positively affects productivity in transition economies. The results also suggest that private sector development has a positive impact on labor productivity through privatization of state-owned firms rather than the entry of new private firms