Why Do Similar Reforms Produce Dissimilar Outcomes? Privatization Effectiveness in the Shadow of Ukraine's Orange Revolution

Scott Gehlbach (UW Madison)
John S. Earle (George Mason University)

Abstract: We examine the role of political stability on reform outcomes, exploiting a unique panel dataset of over 7,000 Ukrainian manufacturing enterprises, many of which were privatized following the collapse of communism. Our analysis focuses on the performance of these firms before and after the 2004 Orange Revolution, which resulted in a dramatic shift in the balance of power among regions in Ukraine. We find a sharp divergence after the Orange Revolution in the relative performance of privatized firms between regions supportive of and opposed to Viktor Yushchenko, eventual winner of the 2004 Ukrainian presidential election. This effect is driven by disproportionately weak productivity gains among privatized firms in regions outside of Yushchenko's geographic base in far western Ukraine, possibly reflecting conflict within the coalition that took power after the Orange Revolution.

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