Privatization and output behavior during the transition: Methods matter!

This paper clarifies what dominant methods of privatization contributed to the macroeconomic gains from privatization during the transition. Building upon the macroeconomic empirical literature on transition, our results first support the Kornai's view. Economic performance gains come only from the use of gradual sales as a primary method of privatization. However, we find that primary methods of privatization leading to permanent changes in the ownership structure of the economies have different effects on output levels but not on annual growth rates.