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


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     This research was sup,ported by the National Coun,cil for East Euro,pean and Eur,asian Research. We thank Jo,anne Low,ery for edi,to,rial assis,tance, Phi,lipp Jonas, Gábor Kézdi, and Mark Schaf,fer for econo,met,ric help and advice, and Tom Coupé, Vla,di,mir Gim,pel,son, Ros,ti,slav Kap,eliushni,kov, Steve Pis,chke (the edi,tor), two anon,y,mous ref,er,ees and par,tic,i,pants at pre,sen,ta,tions at the Up,john Insti,tute, Cen,tral Euro,pean ,Uni,ver,sity, Kyiv School of Eco,nom,ics, Insti,tute of Eco,nom,ics of the Hun,gar,ian Acad,emy of Sci,ences, Cen,ter for Labor Stud,ies at the Higher School of Eco,nom,ics, Uni,ver,sity of Mary,land, CUNY Grad,u,ate Cen,ter, Con,fer,ence on Com,par,a,tive Anal,y,sis of Enter,prise Data, Soci,ety of Labor Econ,o,mists and Amer,i,can ,Eco,nomic Asso,ci,a,tion meet,ings for help,ful com,ments. Assem,bling and pre,par,ing the data for this pro,ject involved large teams of col,lab,o,ra,tors and we are grate,ful for con,sci,en,tious work by Anna Hor,váth, Anna Lov,ász, Béla Személy and Ágnes Törõcsik on the Hun,gar,ian data; Io,ana Dan, Vic,tor Kaz,nov,sky, Cat,a,lin Pa,una, Iri,na Vantu and Rux,an,dra Ste,fan on the Roma,nian data; and Nata,lia Akh,min,a, Ta,ti,ana An,drey,eva, Se,rhiy Bilet,sky, Ivan Mar,yan,chyk, Alex,an,der Scher,ba,kov and Vla,di,mir Vak,hi,tov on the Ukrai,nian data. We are also grate,ful to the Hun,gar,ian National Bank for coop,er,a,tion and data sup,port on the Hun,gar,ian anal,y,sis, and to EROC (Eco,nomic Research and Out,reach Cen,tre at the Kyiv-Mo,hyla School of Eco,nom,ics) for sup,port of Ukrai,nian data col,lec,tion and prep,a,ra,tion. All errors are our own.


We use longitudinal methods and universal panel data on 30,000 initially state-owned manufacturing firms in four transition economies to estimate the impact of privatisation on employment and wages. The results consistently reject job losses and never imply large wage cuts from either domestic or foreign privatisation. The domestic privatisation estimates are close to zero for employment; for wages, they are negative but small in magnitude. Estimated foreign privatisation effects are nearly always positive and sometimes large for both outcome variables. We interpret the employment and wage results in terms of underlying scale, productivity and cost effects of privatisation.