PRODUCTIVITY GROWTH AND FIRM OWNERSHIP - AN ANALYTICAL AND EMPIRICAL-INVESTIGATION

We focus on the effect of state versus private ownership on the rates of firm-specific productivity growth and cost decline by developing a model of endogenous, firm-specific productivity growth and testing its implications against panel data on 23 international airlines of varyi ng levels of state ownership over the period 1973-83. Our model and em pirical results show that state ownership can lower the long-run annua l rate of productivity growth or cost decline, but not necessarily the ir levels in the short run. Observed level differences in productive e fficiency across private and state-owned firms may thus be a function of the age distribution of the firms being compared. These results app ear to be independent of whether the firms operate under apparently mo re or less competitive or regulated markets and whether they differ in production scales. The analysis offers new insights concerning the re cent trend toward privatizing state-owned enterprises that has been ob served in many countries.