PRELIMINARY: DO NOT QUOTE OR REPRODUCE WITHOUT CONSENT OF THE AUTHORS The Effects of Privatization on Productive Efficiency: Evidence from the Baltic Republics* by

While the Baltic Republics began transition from substantially similar starting points, diverse patterns of enterprise ownership soon emerged. This provides an unusual context in which to test competing theories on the productivity effects of alternative ownership structures, including the propositions that outside ownership is more efficient than insider ownership and that managerial ownership is preferred over employee ownership. New and unusual data sets for large samples of firms in Estonia, Latvia and Lithuania enable comparable production functions specifications to be estimated for all three countries for varying years during the period 19931996. The main findings are: (i) the effects of majority ownership varies over time within a country; (ii) the effects of majority ownership varies across countries; (iii) majority employee ownership has either positive or zero effects upon productivity. Findings thus provide only weak support for the conventional wisdom. * The authors would like to acknowledge the enormous efforts of our partners and colleagues in each of the three Baltic Republics, especially in arranging for data collection. Comments by Jeff Pliskin, and support from the EEC, ACE Phare 1992, the Danish Research Council for Social Sciences,NSF SBR 9511465 and the National Council for Eurasian and East European Research are gratefully acknowledged. ** Dept of Economics Hamilton College Clinton NY 13323. E-MAIL: [email protected]. Fax: 315 859 4477. Phone: 315 853 4381 *** Centre for East European Studies, Copenhagen Business School.