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Restructuring of State-Owned Enterprises and Workers: Evidence from East Germany

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  • Hennicke, Moritz

Abstract

I study the impact on workers of restructuring communist firms during the transition to capitalism. Drawing on close to the universe of communist state-owned enterprises under the authority of the German privatization agency in the 1990ies, I am able to link firms across industries and districts to workers and their labor market outcomes before and after exposure to firm restructuring. I study effects of two treatments: First, I find that the advent of market competition through firm closures by the privatization agency increases unemployment. Second, I estimate that the genesis of private ownership in the form of privatizations lowers household income and well-being of workers. To explore the role of ownership, I conduct event studies at the firm level and find that privatized firms downsize compared to firms remaining state-owned. Building a conceptual framework on the idea that the transition implied large temporary uncertainties, the shrinking of privatized firms might have followed from a higher desire by private owners to reduce exposure to risk as opposed to the state.

Suggested Citation

  • Hennicke, Moritz, 2023. "Restructuring of State-Owned Enterprises and Workers: Evidence from East Germany," OSF Preprints jext7, Center for Open Science.
    • Handle: RePEc:osf:osfxxx:jext7
    DOI: 10.31219/osf.io/jext7
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    References listed on IDEAS

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    4. Easterlin, Richard A. & Plagnol, Anke C., 2008. "Life satisfaction and economic conditions in East and West Germany pre- and post-unification," Journal of Economic Behavior & Organization, Elsevier, vol. 68(3-4), pages 433-444, December.
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