What is the Cost of Privatization for Workers?

Abstract

Using rich administrative data on Swedish firms and workers covering two decades, we study how the privatization of state-owned enterprises affects the careers and welfare of workers. Consistent with the effects of an initial reorganization of the workforce, wage income declines and unemployment increases. These effects are stronger for workers protected by state ownership. We do not find negative spillovers of privatization on family and health outcomes. We also demonstrate that privatization encourages workers to enter entrepreneurship. The firm-level productivity gains from privatization are approximately five times larger than the incumbent worker-level costs due to lost wage income.

Keywords: Employment, entrepreneurship, family, health, labor, privatization, state-owned enterprises (SOEs), unemployment, wages.

JEL Classification: G34, J24, J63, L26, L33, M51.