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Does Privatization Hurt Workers? Lessons from Comprehensive Manufacturing Firm Panel Data in Hungary, Romania, Russia, and Ukraine

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  • J. David Brown

    (Heriot-Watt University and CEU Labor Project)

  • John S. Earle

    (W.E. Upjohn Institute for Employment Research and Central European University)

  • Almos Telegdy

    (Central European University and Institute of Economics of the Hungarian Academy of Sciences)

Abstract

We estimate the effects of privatization on firm-level wages and employment in four transition economies. Applied to longitudinal data on manufacturing firms, our fixed effect and random trend models consistently fail to support workers' fears of job losses from privatization, and they never imply large negative effects on wages; only for domestic privatization in Hungary and Russia are small (3-5%) negative wage effects found. Privatization to foreign investors has positive estimated impacts on both employment and wages in all four countries. The negligible consequences of domestic privatization for workers 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 under foreign ownership results from a substantial scale-expansion effect that dominates the productivity-improvement effect, and the positive wage outcome from a productivity effect that dominates the effect on cost reduction.

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Bibliographic Info

Paper provided by W.E. Upjohn Institute for Employment Research in its series Upjohn Working Papers and Journal Articles with number 05-125.

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Date of creation: Nov 2005
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Handle: RePEc:upj:weupjo:05-125

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

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References

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Citations

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Cited by:
  1. John S. Earle & Álmos Telegdy, 2007. "Ownership and Wages: Estimating Public-Private and Foreign-Domestic Differentials using LEED from Hungary, 1986-2003," NBER Working Papers 12997, National Bureau of Economic Research, Inc.
  2. Gene Chang & Josef Brada, 2011. "A Model of the Macroeconomic Effects of Privatization on Employment in Transition and Developing Countries with an Application to China," Transition Studies Review, Springer, vol. 18(2), pages 310-327, December.
  3. Gimpelson, V. & Kapeliushnikov, R. & Lukyanova, A. & Ryzhikova, Z. & Kulyaeva, G., 2010. "Ownership and Wage Differentiation in Russia," Journal of the New Economic Association, New Economic Association, issue 5, pages 48-72.
  4. Robert E. Lipsey, 2006. "Measuring the Impacts of FDI in Central and Eastern Europe," NBER Working Papers 12808, National Bureau of Economic Research, Inc.
  5. Sándor Csengödi & Dieter M. Urban, 2008. "Foreign Takeovers and Wage Dispersion in Hungary," CESifo Working Paper Series 2188, CESifo Group Munich.
  6. John S. Earle & Almos Telegdy, 2007. "Ownership and Wages: Estimating Public-Private and Foreign-Domestic Differentials with LEED from Hungary, 1986–2003," Upjohn Working Papers and Journal Articles 07-134, W.E. Upjohn Institute for Employment Research.

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