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Impact of privatization on employment and earnings

Author

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  • John S. Earle

    (George Mason University, USA, and IZA, Germany)

Abstract

Conventional wisdom and prevailing economic theory hold that the new owners of a privatized firm will cut jobs and wages. But this ignores the possibility that new owners will expand the firm's scale, with potentially positive effects on employment, wages, and productivity. Evidence generally shows these forces to be offsetting, usually resulting in small employment and earnings effects and sometimes in large, positive effects on productivity and scale. Foreign ownership usually has positive effects, and the effects of domestic privatization tend to be larger in countries with a more competitive business environment.

Suggested Citation

  • John S. Earle, 2014. "Impact of privatization on employment and earnings," IZA World of Labor, Institute for the Study of Labor (IZA), pages 1-93, October.
  • Handle: RePEc:iza:izawol:journl:y:2014:n:93
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    References listed on IDEAS

    as
    1. Simeon Djankov & Peter Murrell, 2002. "Enterprise Restructuring in Transition: A Quantitative Survey," Journal of Economic Literature, American Economic Association, vol. 40(3), pages 739-792, September.
    2. Bhaskar, V & Khan, Mushtaq, 1995. "Privatization and Employment: A Study of the Jute Industry in Bangladesh," American Economic Review, American Economic Association, vol. 85(1), pages 267-273, March.
    3. Lehmann, Hartmut & Muravyev, Alexander & Razzolini, Tiziano & Zaiceva, Anzelika, 2013. "The wage and non-wage costs of displacement in boom times: Evidence from Russia," Journal of Comparative Economics, Elsevier, vol. 41(4), pages 1184-1201.
    4. J. DavidBrown & JohnS. Earle & Álmos Telegdy, 2010. "Employment and Wage Effects of Privatisation: Evidence from Hungary, Romania, Russia and Ukraine," Economic Journal, Royal Economic Society, vol. 120(545), pages 683-708, June.
    5. Jeffry M. Netter & William L. Megginson, 2001. "From State to Market: A Survey of Empirical Studies on Privatization," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 321-389, June.
    6. J. David Brown & John S. Earle, "undated". "The Reallocation of Workers and Jobs in Russian Industry: New Evidence on Measures and Determinants," Upjohn Working Papers and Journal Articles jse20031, W.E. Upjohn Institute for Employment Research.
    7. Brown, J. David & Earle, John S., 2002. "Gross Job Flows in Russian Industry Before and After Reforms: Has Destruction Become More Creative?," Journal of Comparative Economics, Elsevier, vol. 30(1), pages 96-133, March.
    8. Brown, J. David & Earle, John S. & Vakhitov, Volodymyr, 2006. "Wages, layoffs, and privatization: Evidence from Ukraine," Journal of Comparative Economics, Elsevier, vol. 34(2), pages 272-294, June.
    9. J. David Brown & John S. Earle & Almos Telegdy, 2006. "The Productivity Effects of Privatization: Longitudinal Estimates from Hungary, Romania, Russia, and Ukraine," Journal of Political Economy, University of Chicago Press, vol. 114(1), pages 61-99, February.
    10. 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 161-181, May.
    11. Rafael La Porta & Florencio López-de-Silanes, 1999. "The Benefits of Privatization: Evidence from Mexico," The Quarterly Journal of Economics, Oxford University Press, vol. 114(4), pages 1193-1242.
    12. 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, May.
    13. J. David Brown & John S. Earle & Almos Telegdy, "undated". "The Productivity Effects of Privatization: Longitudnal Estimates for Hungary, romania, Russia, and Ukraine," Upjohn Working Papers and Journal Articles jse20063, W.E. Upjohn Institute for Employment Research.
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    More about this item

    Keywords

    privatization; employment; wages; earnings; productivity; output;

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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