internationalization, as many privatization sales involved offerings in international financial markets.<sup>25</sup> To date the start of privatization programs we use data from the World Bank privatization database, which records privatization transactions from developing countries between 1988 and 2003, and the Privatization Barometer database, which has data on privatization transactions starting in 1977 for 23 European countries. For some countries not included in these databases, we collected data on privatization transactions from government sources. We define the starting date of a privatization process as the first year with at least two privatization transactions that is followed by further transactions in at least three of the next four years.<sup>26</sup> We require privatization activity to be maintained for at least some time because we want to capture the start of a privatization program and not isolated transactions. Also, note that we focus on transactions and not the announcement of a privatization program or the introduction of a privatization law, as we want to capture the actual implementation of a privatization program.

Another significant reform in many countries, especially in Latin America and Eastern Europe, was the shift from public pay-as-you-go pension systems to privately managed funded systems.<sup>27</sup> Chile was the first country to implement this type of reform in 1981 and several countries adopted similar systems during the 1990s. Structural pension reforms were expected to improve macroeconomic stability, by reducing the demographic pressures of pay-as-you-go systems and inducing fiscal reform during the transition, reduce labor market distortions, increase savings, and reduce political interference in the system.<sup>28</sup> Pension reform was also seen as conductive for capital market development. As reviewed by Walker and Lefort (2002), pension reform may foster the development of domestic capital markets through three main channels: by inducing authorities to improve the regulatory framework (accumulating “institutional capital”), increasing specialization in the investment decision-making process, and improving incentives for financial innovation.<sup>29</sup> 25 See Bortolotti, Fantini, and Scarpa (2002) for an analysis of the determinants of privatizations through share offerings in international markets.

26 For countries that record privatization transactions in 1988 or 1989 in the World Bank privatization database, we use the dates from Perotti and van Oijen (2001).

27 The nature of the reforms differed across countries, with some countries shifting to fully funded systems of privately managed individual accounts, while others created multipillar systems, in which part of the pension system is pay-as-you-go and there is also a distinct and separate privately managed funded component. See Rutkowski (1998, 2002) for a description of the reforms in transition economies. Queisser (1998), De Ferranti, Leipziger, and Srinivas (2002) and Gill, Packard, and Yermo (2005), among many others, review the Latin American experience.

28 There is a large literature discussing the impact of structural pension reforms. See, for example, World Bank (1994), Feldstein (1998), Orszag and Stiglitz (2001), and Feldstein and Liebman (2002).

29 Walker and Lefort (2002) find evidence of a reduction in the cost of capital and higher trading volumes as a result of pension reform. Catalan, Impavido, and Musalem (2001) analyze the Granger causality between contractual savings (assets held by pension funds and life insurance companies) and stock market 9