Peter Szewczyk IOEA 2017 Corsica, France

1. The Modes of Privatization and
Misallocation of Available Resources
Theory and Evidence from Poland
Peter Szewczyk
University of Warsaw
GRAPE
Supervisors:
dr hab. Joanna Tyrowicz
dr Jan Hagemejer Group for Research in Applied Economics

2. Context & Topic
2
Poland’s post-socialist transition
Privatization of Industry
Does a sound institutional framework increase the
efficiency of privatization?
How do we define efficient privatization?
 Firms that should privatize do | Firms that shouldn’t don’t
 Indicator: Level of misallocation, K/L ratio, standing in sector
Poland’s institutional maturity
Three legal privatization paths
 Indirect Path (1990/1997) | Direct (1990/1997) | Liquidation (1981)

3. 3
Data
~ 1300 SOEs in Poland (1988)
 K, L, Y – 1988, 1990-2010 (Firm-Level)
 Measure of resource misuse – K/L Ratio (Firm Level)
 Region, Sector, Cohort (year founded)
780 – Year of privatization and/or liquidation identified
Legislative pathway to privatization identified

4. 4
Theory
Dubious rule of law as a key economic issue in post-
socialist transition
 Hoff & Stiglitz (AER, 2004)
Strong legislation incentivize private agents to act in
accordance with the law
 Hay, Sheifer, & Vishny (1996)
Individual decision-making subject to strength of
institutions
 Chong & Gradstein (2007)
Lack of effective gov’t institutions = higher prevalence of
asset stripping
 Hoff & Stiglitz (2005)

5. 5
Model
Game-theoretic governance structure model
Two sets of agents:
 Firms
 Type 1 – suitable for privatization
 Type 2 – suitable for liquidation
 Investors
 Incentive compatibility constraint
Goal of firm: minimize job loss, long-term operations
Goal of investor: maximize payoffs
Under a proper legislative framework:
 Firms can’t misrepresent their profiles
 Investors aren’t incentivized to strip assets

6. 6
State of Advancement & Main Problems
Majority of data compiled
Initial analysis
 % of smaller firms privatizing directly increases after 1997
Basis for interesting case studies
 Pathways of SOEs of national interest
Selection bias
Data scarcity (Early 1990’s)
Intuition on institutional maturity has to be
verified

7. Thank you for your attention!
Author: Peter Szewczyk
e-mail: p.szewczyk@grape.org.pl
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