The Economics of Privatization: Evidence from the Baltics and St. Petersburg

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SBR-9511465 Derek C. Jones, Hamilton College This project will collect data on 100 newly privatized firms in St. Petersburg, Russia. This new, and potentially very useful, data will be combined with previously collected on firms in Latvia, Lithuania, and Estonia to study the effect of ownership forms, particularly employee ownership, on firm performance. As an example, do firms with high levels of employee ownership have substantially different levels of labor productivity than do firms in which there is no employee ownership? Does the level of employee ownership affect the way the firm adjusts to demand shocks and price changes? The swift transformation of the economies of these countries from command to market-based has created an important "natural experiment" with to test theories about the incentive effects of ownership and control of the firm by its employees. This "experiment" is made richer by the fact that, although they all began with similar economic environments, since independence the Baltic Republics and Russia have followed very different paths concerning privatization. The empirical work will consist of the estimation of the productivity effect of ownership variables using a standard production function framework and the estimation of discrete choice models of the ownership and control chosen for the firm.