Leviathan Resists: The Endogenous Relationship between Privatization and Firm Performance

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 P. Arin and M.Ulubasoglu. Public Choice, July 2009, v. 140, n. 1‐2, pp. 185‐204.

Using a panel dataset of privatized cement firms in Turkey, this paper models and finds support for the simultaneous relationship between privatization and firm performance. It is found that favorable short-run performance, weak market potential, higher employment, lower socio-economic development, concentrated voter preferences, and weaker representation of right-wing parties in the firms’ locality delay the timing of privatization. The paper also finds that privatization increases output in the medium-term by reducing the labor stock and promoting the adoption of more advanced technology, such that production shifts from constant to decreasing returns to scale.

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