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

49 Pages Posted: 14 Sep 2008

See all articles by J. David Brown

J. David Brown

US Census Bureau Center for Economic Studies; IZA Institute of Labor Economics

John S. Earle

George Mason University - Schar School of Policy and Government; IZA Institute of Labor Economics

Almos Telegdy

Corvinus University of Budapest; Magyar Nemzeti Bank

Date Written: September 2008

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.

Keywords: privatization, employment, wages, foreign ownership, Hungary, Romania, Russia, Ukraine

JEL Classification: D21, G34, J23, J31, L33, P31

Suggested Citation

Brown, J. David and Earle, John S. and Telegdy, Almos, Employment and Wage Effects of Privatization: Evidence from Hungary, Romania, Russia, and Ukraine (September 2008). IZA Discussion Paper No. 3688, Available at SSRN: https://ssrn.com/abstract=1267829 or http://dx.doi.org/10.1111/j.0042-7092.2007.00700.x

J. David Brown (Contact Author)

US Census Bureau Center for Economic Studies ( email )

4600 Silver Hill Road
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301-763-8769 (Phone)
301-763-5935 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

John S. Earle

George Mason University - Schar School of Policy and Government ( email )

3351 Fairfax Drive
MS 3B1
Arlington, VA 22201
United States
703-993-8023 (Phone)

HOME PAGE: http://earle.gmu.edu

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Almos Telegdy

Corvinus University of Budapest ( email )

Hungary

Magyar Nemzeti Bank ( email )

Szabadsag ter 8-9
Budapest, H-1850
Hungary

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