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Reducing labor redundancy in state owned enterprises

  • Svejnar, Jan
  • Terrell, Katherine

This paper focuses on what determines labor redundancy in selected modes of transport (rails, ports, and buses) in six countries: Brazil, Chile, Ghana, Mauritius, Sri Lanka, and Yugoslavia. It also analyzes different approaches for solving the problem, and concludes that analysis of the labor redundancy problem in public transportation enterprises has been neglected because conceptually it is not a simple, easily identifiable phenomenon and because its treatment is often politically controversial, as it affects social welfare. Governments tend to approach the problem only when circumstances are extreme (budget stress or near-complete breakdown of the transport system). Solutions are then hammered out in a tense environment, with no longer-term vision of the optimal employment and pay practices. This paper also presents a framework for identifying labor redundancy within different countries whose social welfare functions vary in the relative weight given to efficiency and equity . Redundancy-reduction schemes can have a high rate of return and still be socially acceptable. But, cash flow problems may necessitate the assistance of international donor agencies. Attention must be paid to how this compensation is administered, as it can make a difference to the workers'welfare.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 792.

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Date of creation: 31 Oct 1991
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Handle: RePEc:wbk:wbrwps:792
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  1. SVEJNAR, Jan, . "Bargaining power, fear of disagreement, and wage settlements: theory and evidence from U.S. industry," CORE Discussion Papers RP -720, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  2. Krueger, Alan B & Summers, Lawrence H, 1988. "Efficiency Wages and the Inter-industry Wage Structure," Econometrica, Econometric Society, vol. 56(2), pages 259-93, March.
  3. Orley Ashenfelter & James N. Brown, 1985. "Testing the Efficiency of Employment Contracts," Working Papers 573, Princeton University, Department of Economics, Industrial Relations Section..
  4. MaCurdy, Thomas E & Pencavel, John H, 1986. "Testing between Competing Models of Wage and Employment Determination in Unionized Markets," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages S3-S39, June.
  5. Harding, Alan S., 1990. "Restrictive labor practices in seaports," Policy Research Working Paper Series 514, The World Bank.
  6. David Card, 1986. "Efficient Contracts with Costly Adjustment: Short-RUn Employment Determination for Airline Mechanics," NBER Working Papers 1931, National Bureau of Economic Research, Inc.
  7. Brada, Josef C, 1989. "Technological Progress and Factor Utilization in Eastern European Economic Growth," Economica, London School of Economics and Political Science, vol. 56(224), pages 433-48, November.
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