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The Impact of Privatization on the Earnings of Restructured Workers

  • Sebastián Galiani and Federico Sturzenegger

We study the long-term impact of job displacement from a big state owned enterprise as a result of its privatization in a developing country. Our results suggest large reductions in earnings, which persist throughout the years. However, we also find that the displaced worker’s post-displacement earnings are in line with competitive market wages, and unrelated to sector of employment or to tenure losses, indicating that the long-term reduction in earnings as a result of displacement because of privatization can be traced to the loss of wage rents. Our results indicate that job displacement in SOEs may have very large redistributive implications for the workers involved but that this loss does not reflect the loss of specific human capital associated to these jobs.

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Paper provided by Universidad Torcuato Di Tella in its series Business School Working Papers with number longterm.

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Length: 26 pages
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Handle: RePEc:udt:wpbsdt:longterm
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  1. Sebastian Galiani & Hugo A. Hopenhayn, 2001. "Duration and Risk of Unemployment in Argentina," William Davidson Institute Working Papers Series 476, William Davidson Institute at the University of Michigan.
  2. Louis S. Jacobson & Robert J. LaLonde & Daniel Sullivan, 1992. "Earnings Losses of Displaced Workers," Upjohn Working Papers and Journal Articles 92-11, W.E. Upjohn Institute for Employment Research.
  3. Bruce C. Fallick, 1996. "A Review of the Recent Empirical Literature on Displaced Workers," ILR Review, Cornell University, ILR School, vol. 50(1), pages 5-16, October.
  4. James J. Heckman, 1989. "Choosing Among Alternative Nonexperimental Methods for Estimating the Impact of Social Programs: The Case of Manpower Training," NBER Working Papers 2861, National Bureau of Economic Research, Inc.
  5. Alberto E. Chong & Florencio López-de-Silanes, 2004. "Privatization in Mexico," IDB Publications (Working Papers) 6682, Inter-American Development Bank.
  6. Bruce C. Fallick, 1995. "A review of the recent empirical literature on displaced workers," Finance and Economics Discussion Series 95-14, Board of Governors of the Federal Reserve System (U.S.).
  7. Barberis, Nicholas & Boycko, Maxim & Shleifer, Andrei & Tsukanova, Natalia, 1996. "How Does Privatization Work? Evidence from the Russian Shops," Scholarly Articles 3451306, Harvard University Department of Economics.
  8. David Margolis, 2000. "Worker Displacement in France," Working Papers 2000-01, Centre de Recherche en Economie et Statistique.
  9. Dilip Mookherjee & David McKenzie, 2001. "The Distributive Impact of Privatization in Latin America: Evidence from Four Countries," Boston University - Department of Economics - The Institute for Economic Development Working Papers Series dp-128, Boston University - Department of Economics, revised 2002.
  10. Neal, Derek, 1995. "Industry-Specific Human Capital: Evidence from Displaced Workers," Journal of Labor Economics, University of Chicago Press, vol. 13(4), pages 653-77, October.
  11. 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, Oxford University Press, vol. 114(4), pages 1153-1191.
  12. Addison, John T & Portugal, Pedro, 1989. "Job Displacement, Relative Wage Changes, and Duration of Unemployment," Journal of Labor Economics, University of Chicago Press, vol. 7(3), pages 281-302, July.
  13. Daniel S. Hamermesh, 1987. "What Do We Know About Worker Displacement in the U.S.?," NBER Working Papers 2402, National Bureau of Economic Research, Inc.
  14. Megginson, William L & Nash, Robert C & van Randenborgh, Matthias, 1994. " The Financial and Operating Performance of Newly Privatized Firms: An International Empirical Analysis," Journal of Finance, American Finance Association, vol. 49(2), pages 403-52, June.
  15. Máximo Torero & Enrique Schroth & Alberto Pasco-Font, 2003. "The Impact of Telecommunications Privatization in Peru on the Welfare of Urban Consumers," ECONOMIA JOURNAL OF THE LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION, ECONOMIA JOURNAL OF THE LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION, vol. 0(Fall 2003), pages 99-128, August.
  16. Assaad, Ragui, 1999. "Matching Severance Payments with Worker Losses in the Egyptian Public Sector," World Bank Economic Review, World Bank Group, vol. 13(1), pages 117-53, January.
  17. 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.
  18. Paul M. Ong & Don Mar, 1992. "Post-Layoff Earnings among Semiconductor Workers," ILR Review, Cornell University, ILR School, vol. 45(2), pages 366-379, January.
  19. Kenneth A. Couch, 2001. "Earnings Losses and Unemployment of Displaced Workers in Germany," ILR Review, Cornell University, ILR School, vol. 54(3), pages 559-572, April.
  20. Rama, Martin & MacIsaac, Donna, 1999. "Earnings and Welfare after Downsizing: Central Bank Employees in Ecuador," World Bank Economic Review, World Bank Group, vol. 13(1), pages 89-116, January.
  21. Sebastian Galiani & Paul Gertler & Ernesto Schargrodsky, 2005. "Water for Life: The Impact of the Privatization of Water Services on Child Mortality," Journal of Political Economy, University of Chicago Press, vol. 113(1), pages 83-120, February.
  22. James J. Heckman & Hidehiko Ichimura & Petra E. Todd, 1997. "Matching As An Econometric Evaluation Estimator: Evidence from Evaluating a Job Training Programme," Review of Economic Studies, Oxford University Press, vol. 64(4), pages 605-654.
  23. Rama, Martin, 1999. "Public Sector Downsizing: An Introduction," World Bank Economic Review, World Bank Group, vol. 13(1), pages 1-22, January.
  24. Federico Sturzenegger & Ernesto Schargrodsky & Sebastian Galiani & Paul Gertler, 2003. "The Costs and Benefits of Privatization in Argentina: A Microeconomic Analysis," Research Department Publications 3148, Inter-American Development Bank, Research Department.
  25. Ruhm, Christopher J, 1991. "Are Workers Permanently Scarred by Job Displacements?," American Economic Review, American Economic Association, vol. 81(1), pages 319-24, March.
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