Privatization Methods and Economic Growth in Transition Economies

We investigate, using dynamic panel data techniques, the impact of differences in privatization methods, and in private sector and capital market development, on economic growth in transition economies. Mass privatization is found to be the only privatization method to have had a significant positive effect on growth. Stock market development has also had a significant positive impact. Our analysis suggests that in economies with underdeveloped capital markets, the matching of owners to firms under full privatization will be inefficient. This finding has important implications for current privatization policy in developing economies.