better position to extract favors from politicians. On the other two restructuring measures, excess labor and efficiency, privatization leads to a worsening. Only with both deregulation and stabilization is there an improvement in all three measures.

# IV. **Data Description**

We have firn-level data (balance sheet and profit and loss statements) for 1992-95 obtained from private firms (Czech Republic and Hungary) or statistical offices (Bulgaria, Poland, Romania, Slovak Republic, and Slovenia). Typically, the data cover manufacturing firms which were registered as state-owned enterprises (SOEs) in 1991. The data are annual observations at the plant level and cover the majority of plants in manufacturing industries. If some plants are owned by the same parent company, this relationship is accounted for in the data. The data, although not always a complete manufacturing census, are representative of the manufacturing sector in each country. Two types of selection bias are present - informal enterprises are excluded and small formal firms are underrepresented. Thus the sample primarily covers medium and large enterprises in the formal sector.

We exclude all firms which have missing observations and form balanced panels, i.e. all firms show up throughout the 1992-95 period.' The majority of the excluded firms have missing values between the beginning and end of the sample period, which suggests that they were not liquidated. There is no new entry of SOEs in the sample period (entry through split-ups and spinoffs is captured in the data). The information concerning exit of SOEs is not utilized here since we cannot distinguish between apparent exit (due to non-reporting) and true exit (due to liquidation or bankruptcy).

In three countries (Romania, Slovak Republic, Slovenia) we have almost complete coverage, while the data for the other four countries contain about half of the formal manufacturing sector. This is due to two reasons. First, as explained earlier, small firms are not well-covered in the analysis. In the countries where small business was allowed to operate even prior to 1991 - Hungary and Poland - this means that a relatively larger share of firms is not included. Second, countries that have introduced changes in enterprise codings also show smaller coverage. This is especially the case for Bulgaria, where many firms changed their code number (as reported to the Statistical Office) once they were corporatized in 1994. A similar problem exists in the Polish data. During the 1993-95 period, over 1,000 Polish manufacturing firms were sold through liquidation-privatizations. The process meant that a new company emerged, which was not easily traceable (by the econometrician) to the old state firm. This type of enterprises are hence underrepresented in our data - we have been able to include only 147 such firms in the analysis.

Although international accounting standards (IAS) were introduced in all seven countries (as of January 1995 in Bulgaria and Romania; a year earlier in the other five countries), many

> **1** This procedure mostly affects the Bulgarian dataset. Although we have the complete manufacturing census, only half of all firms report consistently in all years.

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