8 state enterprise to shine if demand is growing at double-digit rates). In this section, therefore, we would like to assess, through the use of a formal statistical model, the extent of structural adjustment, as opposed to cyclical response, in the Polish industrial sector. In addition, we will pay particular attention to the differential behavior of public and private sectors. Our variable of choice is labor productivity.<sup>7</sup> The analysis is based on a panel data set of 88 three-digit level manufacturing industries (Polish industrial classification system). Data cover all medium and large enterprises (i.e., enterprises with 20 or more employees) in the manufacturing sector. There are nineteen two-digit industries8 Data span from 1992:1 through 1993:IV, and report, for each industry, the amount of output accounted for by private and public firms (cooperatives being included among private firms)<sup>9</sup> . The period covered by the data set is particularly interesting for the analysis of the extent of structural adjustment. It was in fact characterized by recovery of demand, strong growth in private sector, and continued labor force adjustment.

Basic statistics on sales and labor productivity growth across industries are reported in Table 4. As could be expected, private enterprises have outperformed state-owned enterprises in most sectors. Sales growth has been by far higher in private enterprises than 7 Other possible indicators of supply adjustment would not have provided sufficiently reliable information for a formal statistical test. Measurement of total factor productivity is very difficult if not impossible, given the almost meaningless statistics on capital investment and the capital stock. Data on profitability of enterprises suffer from faulty accounting practices, due among other things to the rapid progress, particularly among private enterprises, on the learning curve of tax evasion, particularly among private enterprises.

Coal, power, iron and steel, non-ferrous metallurgy, metal products, engineering, precision instruments, transport equipment, electronics, chemicals, building materials, glass, ceramics, wood, paper, textiles, clothing, leather and food processing.

9 Residual three-digit industries within each two-digit sector (i.e. those labeled Other Industries) have been removed from the sample, because they typically cover very heterogeneous goods and production processes. Also, a number of industries with large anomalies in the data - due to strikes, other exceptional events and mistakes - have been removed from the sample. Unfortunately, because of the change of the industrial classification code used by the Polish Statistical Bureau, data for 1994 are not consistent with 1992 and 1993 data. Labor productivity is real output divided by the number of employees. Output is measured here as sales (at constant prices). In order to obtain a proper measure of output, one should of course correct the sales figures for the changes of inventory. However, given Polish accounting practices and the high level of inflation occurred in the past, obtaining a real measure of inventories is quite an arduous task. We therefore chose to use data on sales as the closest reliable measure of output.