Privatisation and productivity growth

Dr Amalavoyal Chari, University of Sussex

Start: Nov 2014  |  End: Oct 2017

Research Councils UK project page

This research project aims to conduct the first empirical analysis of the effects of privatisation of State Owned Enterprises (SOEs) on the allocation of productive resources in a Low-Income Country (LIC), addressing the following questions:

  •  How does privatisation impact the productivity of other private enterprises that have labour and input market linkages with the privatized SOE?
  •  How do the market and regulatory environments interact with privatisation? We will examine a number of policy features that are likely to condition the effects of privatisation, including labour legislation and trade openness.

The hypothesis is that the operation of state-owned enterprises (SOEs) may lock an economy into an inefficient allocation of resources. The research will gain an insight of when and under what conditions privatisation policy can serve as an instrument to restore allocative efficiency and improve aggregate productivity by releasing resources to more innovative sectors of the economy.

The project will utilise data from annual industry surveys, as well as data from household employment surveys, and combine these with data on privatisation in India. A comparison of changes in productivity and labour market outcomes for factories in districts that saw a reduction in the public sector due to privatization, will be made with districts that experienced no changes. This will allow the team to identify and estimate the effects of privatization.

The expected outputs of this project will include 2-3 academic papers presenting the analysis of the effects of privatisation in India. These findings will then be built upon to develop a policy paper that applies the lessons learnt to provide recommendations that can guide privatisation policy in Bangladesh. This policy paper and related policy briefs will be disseminated widely in the policy and academic community in Bangladesh.