Abstract
This article explores the impact of turnover and restructuring on labour productivity in the Polish economy over the period 1988 to 1993. Changes in aggregate productivity are decomposed into elements corresponding to productivity growth among survivors, market share growth by survivors and the contributions of entering and exiting firms. The traditional entry and exit effects begin to work as transition to a market economy progresses. However, initial productivity improvements are due to changes in market shares of the existing firms following the break-up of large enterprises. Regression analysis shows that changes in the firm-level productivity are affected by restructuring and a more competitive economic environment.
Highlights
Central to the whole purpose of transition from a state-owned, planned economy to a privately owned, market economy is the expectation that a principal constraint on productivity growth is removed as resources are freed to flow to their most valuable use
Both studies use relatively small sample divested activities and each acknowledges the possibility of systemic losses elsewhere, but they point to potentially large gains resulting from a reversal of the large-scale enterprise policy that was necessary to facilitate central planning
This paper represents a first attempt to evaluate the alternative sources of aggregate productivity change in a transition economy experiencing the full throws of change
Summary
Central to the whole purpose of transition from a state-owned, planned economy to a privately owned, market economy is the expectation that a principal constraint on productivity growth is removed as resources are freed to flow to their most valuable use. While the circumstances of transition clearly generated opportunities for new firms, they resulted in restructuring of existing enterprises on an unprecedented scale This involved not merely the transfer into private ownership of existing state-owned activities, but the break-up of large numbers of such enterprises. Hanousek et al (2004) confirm a positive performance effect for spinoffs, a result they attribute to the elimination of inefficiencies resulting from diseconomies of scale, weak managerial incentives, and a lack of focus on core competencies Both studies use relatively small sample divested activities and each acknowledges the possibility of systemic losses elsewhere, but they point to potentially large gains resulting from a reversal of the large-scale enterprise policy that was necessary to facilitate central planning.
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