The Effects of Privatization on Productivity and Capital Adjustment


In 1987, the Japan National Railway (JNR) was privatized and separated into several passenger and freight railway companies, called JRs. Using econometric techniques, this study analyzes performance changes among the JRs and looks into the main factors which increase total factor productivity (TFP). We also investigate whether or not over-capitalization in capital input existed before privatization.
TFP growth after privatization was annually 2.97%, with privatization raising TFP growth by 1.62% annually. Over-capitalization at the former JNR has been largely corrected by privatization.

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