Employment and Wage Effects of Privatization: Evidence from Hungary, Romania, Russia, and Ukraine

J. David Brown (), John Earle () and Almos Telegdy ()

No 3688, IZA Discussion Papers from Institute for the Study of Labor (IZA)

Abstract: We use longitudinal methods and universal panel data on 30,000 initially state-owned manufacturing firms in four transition economies to estimate the impacts of privatization on employment and wages. The results in all four countries consistently reject job losses and they never imply large wage cuts from privatization to either foreign or domestic owners. The domestic privatization estimates are close to zero for employment, while for wages they are negative but small in magnitude; estimated foreign privatization effects are nearly always positive and sometimes large for both outcome variables. We find that the negligible consequences of domestic privatization result from effects on scale, productivity, and costs that are large but offsetting in Hungary and Romania, and from small effects of all types in Russia and Ukraine. The positive employment outcome of foreign ownership results from a substantial scale-expansion effect that dominates the productivity-improvement effect, and the positive wage outcome from productivity improvement dominating the cost-reduction effect.

Keywords: privatization; employment; wages; foreign ownership; Hungary; Romania; Russia; Ukraine (search for similar items in EconPapers)
JEL-codes: D21 G34 J23 J31 L33 P31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cis, nep-lab and nep-tra
Date: 2008-09
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Forthcoming in: Economic Journal

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Working Paper: Employment and Wage Effects of Privatization: Evidence from Hungary, Romania, Russia, and Ukraine (2008)
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