Table 3, Panel A looks at differences across time of enterprises by sector for the control and isolated groups separately. The differences are calculated using 1996 performance as a benchmark. A negative Z-statistics on employment, for example, would mean that the firms have reduced employment between 1992 and 1996. A positive sign on profitability would indicate that firms improved their performance during 1992-96. Finally, a negative sign on subsidies would indicate hardened budget constraints. In all cases, the coefficients are statistically significant if they are above 1.96 in absolute magnitude. Since agriculture constitutes about half the sample for both sets of firms, it is possible that it drives the overall result. I hence also run the Wilcoxon Test on all sectors excluding agriculture. The results are reported in the next to last row of Table 3, Panel A.

Across sectors, in both the control and the isolation groups, the Wilcoxon test statistics indicate that employment was reduced significantly between 1992 and 1996. The largest reductions occurred in agriculture - Z-stat of -3.485 and -7.113 for the isolated and control groups respectively. Although the isolation program resulted in labor shedding, I show that more drastic labor shedding took place in firms outside the program, despite their lack of access to redundancy payments. Profitability went down for both groups: Z- stats of -4.072 and -0.301 respectively. This decline was driven primarily by the worsening of the agricultural sector. Once agricultural farms were excluded, profitability in both groups actually increased (Z-statistics of 2.148 and 2.718 for isolated and control groups).

Significant positive improvements in profitability were recorded in three manufacturing sectors (Non-Metallic Products; Chemicals; Metallurgy) in both groups. This is indicative of strong industry effects. Subsidies were cut in all sectors with the exception of agriculture. Again, control group firms were cut off from subsidies more than their comparators under isolation - the respective Z-stats are -5.127 and -8.448.

Panel A compares firm performance in 1996 (the "after" performance) to the "before" performance in 1992. An alternative method for evaluating performance would be to compare matched pairs from the isolation and control groups (Panel B). A Wilcoxon test statistics were computed for the difference in characteristics between pairwise matched isolation and control group firms in 1992 and 1996. The 1992 comparison shows that the matching procedure managed to pair firms well. As in Panel A, I use a separate test on all sectors excluding agriculture. In the last column, I also add structural funds and subsidies given to isolated firms together to get the total amount of budgetary transfers to enterprises in the program.

The results in Panel B suggest that isolated enterprises saw a deterioration in their performance relative to their matched comparators. Relative to 1992, the situation in 1996 reflects an improvement for the control group in all aspects. In particular, isolated firms retained higher employment - Z-stats of 4.980 in 1996 as compared to 2.662 in 1992; became less profitable - Z-stats of -4.679 in 1996 as compared to -1.642 in 1992; and received more budgetary transfers - Z-stats of 10.524 in 1996 as compared to 7.809 in 1992. The overall results in all indicators are driven by the inclusion of agriculture. Once 9