Effects of Privatization on Labor in Turkey

Abstract

The effect of privatization on labor has been one of the least addressed issues. This paper evaluates the impact of privatization on dismissed workers in Turkey. Earnings equations at state employment and after dismissal are estimated and compared to evaluate the changes in worker's welfare. Dismissed workers experienced significant earnings losses upon reemployment. Earnings losses were smaller for the self employed than for the wage employed. Post-dismissal jobs were not only characterized by lower earnings but also by a lower quality of non-monetary attributes. The magnitude of the true welfare losses are inferred from the subjective evaluations provided by the workers themselves. Workers felt that what they had lost had not been fully compensated by the severance pay they received.

Keywords: Privatization, Labor retrenchment, Compensation, Turkey

JEL Classification: J45, J33