Equality, Participation, Transition: Essays in Honour of Branko Horvat

Derek C. Jones and Niels Mygind 171
However, to respond to some of the concerns which were raised by
our discussion of the available theoretical and empirical evidence, we
also draw on our data to estimate models which involve substantial
augmentation of these approaches. In these preliminary exercises, we
add to specification (1) at least one of two sets of other variables which
are arguably of importance to economic performance: (i) OD, a vector
of variables for changes in ownership; (ii) MO, a vector of variables for
measuring the influence of a large minority ownership. Thus a specification
which includes these two additional vectors is:
AVPERF o INIPERFOL OD MO
i i IND Tallinn (2)
Also, we report the results of F tests (which are used to select which
specification from these augmented approaches best fits the data).
Findings from regression analysis are reported in Tables 10.1–10.3.
The most obvious finding that emerges from these exercises is the low
overall explanatory power of these estimates. The R 2 is always less than
0.1 (which is well below the fit obtained using similar specifications for
samples of firms in other countries). The explanatory power of the
specification for labour productivity is particularly poor.
Table 10.1A shows the first set of regressions, where the dummy variable
for privatization measures the effect of privatization on performance.
16 The privatization effect, however, produced the expected
direction of growth for only sales and employment. More importantly,
privatization only had a statistically significant and positive effect on
the growth in sales and exports/sales. Thus, contrary to the Frydman
et al. (1997) study, the Estonian data do not provide strong evidence
that privatization per se has favourable performance effects.
The magnitude of the privatization effects are also often surprisingly
large. Thus for sales growth, the privatization effect is about 40 per
cent per year. Privatization also had a statistically significant and negative
effect on the growth rate of exports-to-sales, where privatized firms
are expected to have a 48 per cent lower growth in this ratio per year
relative to non-privatized firms. While this result appears to contradict
the expectation that exports-to-sales would improve after privatization,
it might be explained by privatized firms starting from a much higher
ratio of exports-to-sales than state firms and the inadequacy of our
control for initial performance. Additionally, the findings reported in
Table 10.1A indicate that, relative to state firms, labour productivity
fell. While this was only a small and statistically insignificant fall, this
is still contradictory to the expected outcome. Also, according to this