Privatization, property rights and technical efficiency in Eastern Europe

The enhancement of economic performance constitutes the main goal in the economic transformation process in Eastern Europe. This may be revealed by changes in the levels of efficiency achieved in the operation of privatized enterprises. In this thesis we provide an empirical analysis of technical efficiency in the former CSR, and in the Czech Republic, over the period 1960 to 1989 and 1990 to 1994 respectively.;Empirical investigation into sector or firm level efficiency in the Czech Republic has been sparse following privatization. Thus, we sought to determine the extent of the success of privatization of former state-owned enterprises, as reflected by the extent to which technical efficiency (TE) has improved in the manufacturing sector following the implementation of mass privatization.;Deterministic production functions (DFPF) and stochastic production functions (SFPF) were employed to estimate TE attained in selected sectors of the manufacturing sector of the Czech Republic. The SFPF model was also employed since it was anticipated that the use of dummy variables that were produced by the deterministic model would possibly capture macroeconomic events and other external factors that impacted on TE. Further, we recognized that the composed error term, in the possibly more sophisticated SFPF, would encapsulate the effect of random variables and other non-quantifiable factors that were excluded by the deterministic model.;It is emphasized that despite the wide divergencies of techniques employed in both the DFPF and SFPF models, a similar pattern of increased TE is revealed in the manufacturing sector during the early transition period in the Czech Republic: this had remained a "pure" example of a former command economy until the demise of communism in November 1989. Although we recognize that extraneous factors also influenced TE, nevertheless, these results provide support to the view held widely by economists that a clear relationship exists between ownership, corporate governance, and enterprise efficiency.