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

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Author Info

  • Brown, J. David

    ()
    (U.S. Census Bureau)

  • Earle, John S.

    ()
    (George Mason University)

  • Telegdy, Álmos

    ()
    (Institute of Economics, Budapest)

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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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3688.

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Length: 49 pages
Date of creation: Sep 2008
Date of revision:
Publication status: published in: Economic Journal, 2010, 120(545), 683-708
Handle: RePEc:iza:izadps:dp3688

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Keywords: Ukraine; privatization; wages; foreign ownership; employment; Hungary; Romania; Russia;

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Citations

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Cited by:
  1. Sang-Wook (Stanley) Cho & Juliàn P. Dìaz, 2014. "Accounting for Skill Premium Patterns during the EU Accession: Productivity or Trade?," Discussion Papers, School of Economics, The University of New South Wales 2014-14, School of Economics, The University of New South Wales.
  2. Hang Gao & Joseph Marchand & Tao Song, 2013. "The Supply and Demand Factors Behind the Relative Earnings Increases in Urban China at the Turn of the 21st Century," Comparative Economic Studies, Palgrave Macmillan, vol. 55(1), pages 121-143, March.
  3. Stepan Jurajda & Juraj Stancik, 2009. "Foreign Ownership and Corporate Performance: The Czech Republic at EU Entry," CERGE-EI Working Papers wp389, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
  4. Márton Csillag & Miklós Koren, 2011. "Machines and machinists: Capital-skill complementarity from an international trade perspective," CeFiG Working Papers, Center for Firms in the Global Economy 13, Center for Firms in the Global Economy, revised 25 Mar 2011.
  5. Adelaide Figueiredo & Fernanda Figueiredo & Natália P. Monteiro & Odd Rune Straume, 2010. "Restructuring in privatised firms:a Statis approach," NIPE Working Papers, NIPE - Universidade do Minho 16/2010, NIPE - Universidade do Minho.
  6. Paulo Bastos & Natália Pimenta Monteiro & Odd Rune Straume, 2012. "Privatization and corporate restructuring," NIPE Working Papers, NIPE - Universidade do Minho 10/2012, NIPE - Universidade do Minho.
  7. John Sutherland Earle & Almos Telegdy, 2011. "Who Creates Jobs in Hungary? The Role of Entering, Exiting and Continuing Firms Before and During the Crisis," Budapest Working Papers on the Labour Market, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences 1108, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
  8. John Sutherland Earle & Almos Telegdy, 2011. "Medium-Term Industrial Labor Demand Forecast for Hungary," Budapest Working Papers on the Labour Market, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences 1111, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
  9. Békés, Gábor & Muraközy, Balázs, 2012. "Magyar gazellák. A gyors növekedésű vállalatok jellemzői és kialakulásuk elemzése
    [Hungarian gazelles: what makes a high-growth firm in Hungary?]
    ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(3), pages 233-262.

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