Association for Public Policy Analysis & Management

This paper examines the effect of privatization policy on firm performance. Taking advantage of an unique panel data set derived from the Vietnamese Enterprise Census during 2000 – 2010, I investigate the efficiency and productivity effect of the nation-wide exogenous privatization policy in Vietnam using various functional forms and different estimation models applicable to panel data. My preferred Arellano-Bond estimation model suggests that privatization has a quite large positive impact on firm efficiency and productivity among newly privatized firms, especially among those with larger private and foreign share. However, the findings reveal that in short run employment in the economy suffers a significant decrease as a result of more efficient privatized firms who now have more incentives for profit seeking.