The productivity effects of privatization: The case of Polish cooperatives

This paper evaluates the productivity effects associated with privatization of producer cooperatives. The results, based on a sample of 2164 Polish cooperatives, indicate that privatized cooperatives have: (1) 1% lower total factor productivity (TFP) the year prior to privatization and 3-20% higher TFP in the year of privatization and three years post-privatization, (2) 9-36% higher labor productivity, (3) capital productivity effects of − 16-6%. The evidence is consistent with governance and incentive mechanisms of cooperatives being more effective outside of state interference, and with competition and hard budget constraints leading to pressure to restructure and adopt practices that improve productivity.