Working Paper: CEPR ID: DP1757
Authors: Lubomir Lizal; Miroslav Singer; Jan Svejnar
Abstract: This paper estimates the effects of the 1991 breakups of Czechoslovak state-owned enterprises (SOEs) on subsequent performance of the master enterprises and the spin-off units. The analysis is based on quarterly and annual data of Czechoslovak industrial enterprises. We estimate the performance effect of a spin-off by comparing the performance of enterprises that were present throughout the 1990?92 period, but did not experience any spin-offs, to that of: a) master enterprises that experienced spin-offs; and b) the new spin-off subsiduaries. The estimates suggest that the breakups had a significant immediate (1991) effect on productive efficiency and profitability of industrial firms. The effect was positive for small to slightly above-average size spin-offs and negative for large ones. The hypothesis that the estimated effect of spin-offs on performance was identical for the spin-off subsiduaries and the master enterprises that experienced the spin-offs cannot be rejected. The 1991 estimates thus strongly suggest that the large firms created under the centrally-planned system suffered from inefficiencies that were alleviated by the break-ups of these firms into smaller units.
Keywords: transition; firms; czechoslovakia; spinoff; breakup
JEL Codes: D21; D24; L11; P11
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| breakups (J12) | productive efficiency (D24) |
| breakups (J12) | profitability (L21) |
| small to slightly above-average spinoffs (F12) | productive efficiency (D24) |
| small to slightly above-average spinoffs (F12) | profitability (L21) |
| larger spinoffs (F12) | value added per worker (J39) |
| spinoffs (Y60) | performance (D29) |
| performance (D29) | competition (L13) |
| performance (D29) | profit dissipation (D33) |
| breakups (J12) | inefficiencies (D61) |