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Wages, Layoffs, and Privatization: Evidence from 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)

  • Vladimir Vakhitov

    (University of Kentucky and Kyiv-Mohyla School of Economics)

Abstract

This paper estimates the effects of privatization on worker separations and wages using retrospective data from a national probability sample of Ukrainian households. Detailed worker characteristics are used to control for compositional differences and to assess types of observable "winners" and "losers" from privatization. Preprivatization worker-firm matches are used to control for unobservables in worker and firm selection. The results imply that privatization reduces wages by 5 percent and cuts the layoff probability in half. Outside investor ownership reduces separations but leaves wages unaffected. Winners from privatization tend to be higher skilled employees of larger firms, but there is no discernable relationship with gender, education, or experience.

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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 06-126.

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Date of creation: Feb 2006
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Handle: RePEc:upj:weupjo:06-126

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Keywords: privatization; layoffs; wages; Ukraine;

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References

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  1. Belton M. Fleisher & Klara Sabirianova Peter & Xiaojun Wang, 2004. "Returns to Skills and the Speed of Reforms: Evidence from Central and Eastern Europe, China, and Russia," William Davidson Institute Working Papers Series 2004-703, William Davidson Institute at the University of Michigan.
  2. Rafael La Porta & Florencio Lopez-de-Silane, 1997. "The Benefits of Privatization: Evidence from Mexico," NBER Working Papers 6215, National Bureau of Economic Research, Inc.
  3. Elizabeth Brainerd, 2000. "Women in transition: Changes in gender wage differentials in Eastern Europe and the former Soviet Union," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 54(1), pages 138-162, October.
  4. J. David Brown & John S. Earle & Almos Telegdy, 2005. "The Productivity Effects of Privatization: Longitudinal Estimates from Hungary, Romania, Russia, and Ukraine," Upjohn Working Papers and Journal Articles 05-121, W.E. Upjohn Institute for Employment Research.
  5. Djankov, Simeon & Murrell, Peter, 2002. "Enterprise Restructuring in Transition: A Quantitative Survey," CEPR Discussion Papers 3319, C.E.P.R. Discussion Papers.
  6. Brown, J. David & Earle, John S., 2002. "The Reallocation of Workers and Jobs in Russian Industry: New Evidence on Measures and Determinants," IZA Discussion Papers 564, Institute for the Study of Labor (IZA).
  7. John S. Earle & Klara Z. Sabirianova, 2002. "How Late to Pay? Understanding Wage Arrears in Russia," Journal of Labor Economics, University of Chicago Press, vol. 20(3), pages 661-707, July.
  8. Gorodnichenko, Yuriy & Sabirianova Peter, Klara, 2005. "Returns to schooling in Russia and Ukraine: A semiparametric approach to cross-country comparative analysis," Journal of Comparative Economics, Elsevier, vol. 33(2), pages 324-350, June.
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  10. Boycko, Maxim & Shleifer, Andrei & Vishny, Robert W, 1996. "A Theory of Privatisation," Economic Journal, Royal Economic Society, vol. 106(435), pages 309-19, March.
  11. Haskel, Jonathan & Szymanski, Stefan, 1993. "Privatization, Liberalization, Wages and Employment: Theory and Evidence for the UK," Economica, London School of Economics and Political Science, vol. 60(238), pages 161-81, May.
  12. Brainerd, Elizabeth, 2002. "Five Years after: The Impact of Mass Privatization on Wages in Russia, 1993-1998," Journal of Comparative Economics, Elsevier, vol. 30(1), pages 160-190, March.
  13. Philippe Aghion & Olivier J. Blanchard, 1998. "On privatization methods in Eastern Europe and their implications," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 6(1), pages 87-99, 05.
  14. Jones, Derek C. & Ilayperuma Simon, Kosali, 2005. "Wage determination under plan and early transition: Bulgarian evidence using matched employer-employee data," Journal of Comparative Economics, Elsevier, vol. 33(2), pages 227-243, June.
  15. Munich, Daniel & Svejnar, Jan & Terrell, Katherine, 2005. "Is women's human capital valued more by markets than by planners?," Journal of Comparative Economics, Elsevier, vol. 33(2), pages 278-299, June.
  16. Branko Milanovic, 1999. "Explaining the increase in inequality during transition," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 7(2), pages 299-341, July.
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Cited by:
  1. Figueiredo, Adelaide & Figueiredo, Fernanda & Monteiro, Natália P. & Straume, Odd Rune, 2012. "Restructuring in privatised firms: A Statis approach," Structural Change and Economic Dynamics, Elsevier, vol. 23(1), pages 108-116.
  2. Hartmut Lehmann & Alexander Muravyev & Klaus Zimmermann, 2012. "The Ukrainian longitudinal monitoring survey: towards a better understanding of labor markets in transition," IZA Journal of Labor & Development, Springer, vol. 1(1), pages 1-15, December.
  3. Danzer, Natalia, 2013. "Job Satisfaction and Self-Selection into the Public or Private Sector: Evidence from a Natural Experiment," IZA Discussion Papers 7644, Institute for the Study of Labor (IZA).
  4. Alberto Chong & Gianmarco León, 2007. "Privatized Firms, Rule of Law and Labor Outcomes in Emerging Markets," Research Department Publications 4524, Inter-American Development Bank, Research Department.
  5. Alberto Chong & Gianmarco León, 2007. "Empresas privatizadas, instituciones y consecuencias laborales en paises emergentes," Research Department Publications 4525, Inter-American Development Bank, Research Department.
  6. Mathur, Ike & Banchuenvijit, Wanrapee, 2007. "The effects of privatization on the performance of newly privatized firms in emerging markets," Emerging Markets Review, Elsevier, vol. 8(2), pages 134-146, May.

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