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

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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.
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  • J. David Brown & John S. Earle & Almos Telegdy, "undated". "Employment and Wage Effects of Privatisation: Evidence from Hungary, Romania, Russia, and Ukraine," Upjohn Working Papers jse2010, W.E. Upjohn Institute for Employment Research.
    • Handle: RePEc:upj:weupjo:jse2010
    Note: Appears in The Economic Journal 120(545): 683-708
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    More about this item

    Keywords

    transition economies; privatisation; employment effects; wages;
    All these keywords.

    JEL classification:

    • P2 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

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