The productivity effects of privatization: The Islamic Republic of Iran

One of the major aims of privatization is increasing the productivity by transferring ownership to private sector.This paper estimates this effect in selected state –owned firms. Analysis the productivity effect of privatization of Iranian firms that were initially state-owned will show the requirement of needy policies in management field of privatization to ratify and run the privatization policy faster base on academic estimate. We analyzes the productivity effect of privatization using time - series and cross- section data (panel data) for 21 selected initially state-owned firms that are privatized in different industry with several observations pre and post privatization. Our goal is to make a judgment about the robustness of the estimated privatization effects to alternative choices of econometric methods. We use an economic assumption that data –generation process for ownership is independent of productivity once all other variables, including firm fixed effect and firm specific time trends, are taken in to account. The results of our research show that the model has full explanatory power, showing R2=0.99, meaning that it can explain 99% of the variations in dependent variable being output of the firms. (PRIVATE) variable which is a proxy for privatization is also significant , meaning that privatization of firms having a positive influence on productivity of firms being privatized .Since the variable in the regression are expressed in logarithmic form , Their coefficients represents the elasticity . So elasticity of output with respect to capital is 0.19 meaning that 5 % increases in capital results in K, nearly 2% increase in output, other variable being constant. In a simple way, elasticity of output with respect to labor (employment) is 0.48, meaning that 10 % increase in labor result into nearly 5% increase in total output