Peruvian Privatization: Impacts on Firm Performance

75 Pages Posted: 19 Apr 2011

See all articles by Maximo Torero

Maximo Torero

International Food Policy Research Institute (IFPRI); International Food Policy Research Institute (IFPRI)

Date Written: December 2003

Abstract

In the nearly ten years since Peru privatized major State Owned Enterprises (SOEs), the overall impact of the process is not yet clear. This paper analyzes the impact of privatization through a detailed statistical and econometric analysis of first difference (the difference between pre- and post-privatization performance), and second difference (change in performance of privatized firms relative to the change in performance of SOEs) of several indicators on profitability, operating efficiency, employment, leverage and convergence. The results, which showed that privately owned firms are more efficient and more profitable than otherwise comparable state owned firms, were consistent with previous literature. In the case of the most competitive sector, the financial system, the newly privatized banks converged towards the leading private banks over time. While the impact of privatization on employment is negative in the short-run, there are more positive impacts in the long term, especially since SOEs traditionally hire employees for political rather than technical reasons. This paper demonstrates that, as the result of privatization, there is a significant increase in indirect employment through services and significant growth of total employment—both direct and indirect.

Suggested Citation

Torero, Maximo and Torero, Maximo, Peruvian Privatization: Impacts on Firm Performance (December 2003). IDB Working Paper No. 186, Available at SSRN: https://ssrn.com/abstract=1814737 or http://dx.doi.org/10.2139/ssrn.1814737

Maximo Torero (Contact Author)

International Food Policy Research Institute (IFPRI) ( email )

1201 Eye St, NW,
Washington, DC 20005
United States

International Food Policy Research Institute (IFPRI) ( email )

1201 Eye St, NW,
Washington, DC 20005
United States

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