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How Does Privatization Affect Workers? The Case of the Russian Mass Privatization Program

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  • Elizabeth Brainerd

Abstract

This paper explores the effect of mass privatization and the development of a new private sector in Russia on the wage and skill distributions in the private and state sectors of the economy. Two questions this paper seeks to answer are: (1) Does wage-setting behavior in privatized firms resemble that of state or private sector firms? And (2) Do rewards to skills differ between the state and private sectors? Analysis of two household surveys conducted over the 1990s indicates that there is a positive premium to work in private sector firms over state enterprises and privatized state enterprises, and that this differential is reduced but not eliminated by controlling for differences in firm and worker characteristics and in hours worked across sectors. Evidence also indicates that newly privatized state enterprises pay higher wages than state enterprises in some years, even though the distribution of skills and returns to skills in the two sectors appear to be quite similar throughout the period. Higher wages in privatized firms likely reflects rent-sharing between workers and managers rather than increased efficiency due to privatization, although the evidence is inconclusive on this point.

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File URL: http://www.wdi.umich.edu/files/Publications/WorkingPapers/wp303.pdf
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Bibliographic Info

Paper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number 303.

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Length: pages
Date of creation: 01 May 2000
Date of revision:
Handle: RePEc:wdi:papers:2000-303

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Keywords: privatization; wages; Russian labor market;

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  1. Andrew K.G. Hildreth and Andrew J. Oswald, . "Rent-Sharing and Wages: Evidence from Company and Establishment Panels," Economics Discussion Papers 425, University of Essex, Department of Economics.
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  14. Ash, Timothy N & Hare, Paul G, 1994. "Privatisation in the Russian Federation: Changing Enterprise Behaviour in the Transition Period," Cambridge Journal of Economics, Oxford University Press, vol. 18(6), pages 619-34, December.
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  16. Maxim Boycko & Andrei Shleifer & Robert W. Vishny, 1993. "Privatizing Russia," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 24(2), pages 139-192.
  17. J Earle & S Estrin & L Leshchenko, 1996. "Ownership Structures," CEP Discussion Papers dp0315, Centre for Economic Performance, LSE.
  18. Shleifer, Andrei & Vishny, Robert W, 1994. "Politicians and Firms," The Quarterly Journal of Economics, MIT Press, vol. 109(4), pages 995-1025, November.
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  20. Robert J. Flanagan, 1995. "Wage Structure in the Transition of the Czech Economy," IMF Working Papers 95/36, International Monetary Fund.
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