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

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Abstract

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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  • J. David Brown & John S. Earle & Almos Telegdy, "undated". "Employment and Wage Effects of Privatisation: Evidence from Hungary, Romania, Russia, and Ukraine," Upjohn Working Papers and Journal Articles jse2010, W.E. Upjohn Institute for Employment Research.
  • Handle: RePEc:upj:weupjo:jse2010
    Note: Appears in The Economic Journal 120(545): 683-708
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    Cited by:

    1. Figueiredo, Adelaide & Figueiredo, Fernanda & Monteiro, Natália P. & Straume, Odd Rune, 2012. "Restructuring in privatised firms: A Statis approach," Structural Change and Economic Dynamics, Elsevier, vol. 23(1), pages 108-116.
    2. Bazhal, Iurii, 2015. "Impact of Wage Policy on Economic Growth in Transitive Countries and New Interpretation of the Phillips Curve," MPRA Paper 67106, University Library of Munich, Germany, revised 07 Oct 2015.
    3. Stepan Jurajda & Juraj Stancik, 2012. "Foreign Ownership and Corporate Performance: The Czech Republic at EU Entry," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 62(4), pages 306-324, August.
    4. Békés, Gábor & Muraközy, Balázs, 2012. "Magyar gazellák. A gyors növekedésű vállalatok jellemzői és kialakulásuk elemzése
      [Hungarian gazelles: what makes a high-growth firm in Hungary?]
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(3), pages 233-262.
    5. Brown, David J. & Earle, John S. & Telegdy, Almos, 2016. "Where does privatization work? Understanding the heterogeneity in estimated firm performance effects," Journal of Corporate Finance, Elsevier, vol. 41(C), pages 329-362.
    6. Paulo Bastos & Natália Pimenta Monteiro & Odd Rune Straume, 2012. "Privatization and corporate restructuring," NIPE Working Papers 10/2012, NIPE - Universidade do Minho.
    7. John Sutherland Earle & Almos Telegdy, 2011. "Medium-Term Industrial Labor Demand Forecast for Hungary," Budapest Working Papers on the Labour Market 1111, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
    8. Hang Gao & Joseph Marchand & Tao Song, 2013. "The Supply and Demand Factors Behind the Relative Earnings Increases in Urban China at the Turn of the 21st Century," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 55(1), pages 121-143, March.
    9. Miklos Koren & Marton Csillag, 2011. "Machines and machinists: Capital-Skill Complementarity from an International Trade Perspective," IEHAS Discussion Papers 1114, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
    10. 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.
    11. John Sutherland Earle & Almos Telegdy, 2011. "Who Creates Jobs in Hungary? The Role of Entering, Exiting and Continuing Firms Before and During the Crisis," Budapest Working Papers on the Labour Market 1108, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
    12. Álmos Telegdy, 2016. "Employment adjustment in the global crisis," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 24(4), pages 683-703, October.
    13. Yasuyuki Todo, 2016. "The effects of privatization on exports and jobs," IZA World of Labor, Institute for the Study of Labor (IZA), pages 309-309, November.
    14. Sang-Wook (Stanley) Cho & Juliàn P. Dìaz, 2014. "Accounting for Skill Premium Patterns during the EU Accession: Productivity or Trade?," Discussion Papers 2014-14, School of Economics, The University of New South Wales.
    15. Brown, J. David & Earle, John S. & Shpak, Solomiya & Vakhitov, Volodymyr, 2015. "Is Privatization Working in Ukraine? New Estimates from Comprehensive Manufacturing Firm Data, 1989-2013," IZA Discussion Papers 9261, Institute for the Study of Labor (IZA).
    16. Zsuzsa Munkácsi, 2009. "Who exports in Hungary? Export concentration by corporate size and foreign ownership, and the effect of foreign ownership on export orientation," MNB Bulletin (discontinued), Magyar Nemzeti Bank (Central Bank of Hungary), vol. 4(2), pages 22-33, July.
    17. Jelena Lauçev, 2012. "Public-Private Earnings Differentials during Economic Transition in Hungary," Budapest Working Papers on the Labour Market 1202, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
    18. Natalia Danzer, 2013. "Job Satisfaction and Self-Selection into the Public or Private Sector: Evidence from a Natural Experiment," ifo Working Paper Series 169, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    19. da Rocha, Bruno T., 2015. "Let the markets begin: The interplay between free prices and privatisation in early transition," Journal of Comparative Economics, Elsevier, vol. 43(2), pages 350-370.

    More about this item

    Keywords

    transition economies; privatisation; employment effects; wages;

    JEL classification:

    • P2 - Economic Systems - - Socialist Systems and Transition Economies
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

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