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

  • Brown, J. David

    ()

    (U.S. Census Bureau)

  • Earle, John S.

    ()

    (George Mason University)

  • Telegdy, Álmos

    ()

    (Institute of Economics, Budapest)

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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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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  1. Roman Frydman & Cheryl Gray & Marek Hessel & Andrzej Rapaczynski, 1999. "When Does Privatization Work? The Impact Of Private Ownership On Corporate Performance In The Transition Economies," The Quarterly Journal of Economics, MIT Press, vol. 114(4), pages 1153-1191, November.
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