Wages, Layoffs, and Privatization: Evidence from Ukraine

Brown, J. David; Earle, John S.; Vakhitov, Volodymyr

doi:10.17848/wp06-126

Cited by 11 publications

(18 citation statements)

References 13 publications

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“…Although results are not unanimous, the broad picture painted from these studies is that privatisation generally leads to higher wages for workers in the privatised firms. This finding is reported by Bishop and Kay (1988) and Parker and Martin (1996) for UK data, La Porta and Lopez-de-Silanes (1999) for Mexican data, Brainerd (2002) for Russian data, Ho et al (2002) for Chinese data, Brown et al (2006) for Ukrainian data and Monteiro (2010) for Portuguese data. 1 On the other hand, employment effects tend to be more ambiguous and are often found to be negligible (Brown et al, 2010) or negative (Haskel and Szymanski, 1993; La Porta and Lopez-de-Silanes, 1999).…”

supporting

confidence: 77%

“…This approach is novel to the literature and we believe that it is particularly well suited to study the restructuring process of corporate privatisation. 4 Our approach also contrasts sharply with previous approaches. In particular, we do not aim to establish a causal relationship between privatisation and different measures of firm performance or 4 As noted by Villalonga (2000, p. 51):…”

contrasting

confidence: 55%

“…4 Our approach also contrasts sharply with previous approaches. In particular, we do not aim to establish a causal relationship between privatisation and different measures of firm performance or 4 As noted by Villalonga (2000, p. 51):…”

contrasting

confidence: 55%

“…Motivated by this premise, our study departs from the existing empirical 1 A decomposition of wage effects can often reveal more ambiguous results. For example, Brown et al (2006) find that wages drop in privatised firms that are worker-controlled, while Monteiro (2010) find short-term wage losses for workers in privatised firms (that are more than compensated for by the long-term wage gains). 2 There are also several studies focussing on the effect of privatisation on other labour market outcomes (besides average wages and total employment), such as wage discrimination (Liu et al, 2000;Peoples and Talley, 2001), wage inequality (Brainerd, 1998;Ho et al, 2002), returns to seniority or experience (Munich et al, 2005) and labour force composition (Chong and Leon, 2009).…”

mentioning

confidence: 99%

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Restructuring in privatised firms: A Statis approach

Figueiredo

Monteiro

et al. 2012

Structural Change and Economic Dynamics

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We analyse the dynamics and evolution of the corporate restructuring process in the Portuguese banking sector, where 10 banks were privatised during the period 1989-1996. We apply a novel methodological approach in this context, using a multidimensional measure of restructuring that links product and labour market variables.We find evidence of considerable heterogeneity in the restructuring process, where firms adjust at different speeds and intensities. We also find that the wage level is by far the firm attribute that changed more, which is shown to reflect substantial changes in terms of composition, and not size, of the workforce. Our empirical evidence also suggests that privatisation is associated with a higher level of rent sharing.

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supporting

confidence: 77%

contrasting

confidence: 55%

contrasting

confidence: 55%

mentioning

confidence: 99%

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Restructuring in privatised firms: A Statis approach

Figueiredo

Monteiro

et al. 2012

Structural Change and Economic Dynamics

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show abstract

“…A study that focuses on worker turnover finds no evidence of a negative impact of privatization on either employment changes or dismissals [11]. Another study analyzes layoffs and wages in Ukraine, finding a sizable negative effect on layoffs and a small negative effect on wages [12]. From December 1991, shortly after the Soviet Union collapsed and Ukraine became independent, to 2002, estimated layoff rates are always higher in state firms than in privatized firms (Figure 3).…”

Section: Worker and Job Turnover And Wagesmentioning

confidence: 99%

Impact of privatization on employment and earnings

Earle¹,

Shpak²

2019

izawol

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Until recently, employment and wage effects of privatization received little attention in empirical research. None of the conducted studies show large negative effects on either employment or wages. Recent research in transition economies using much larger panel data that enable use of more appropriate evaluation methods confirms this finding and also reports systematically better outcomes for workers under foreign than domestic privatization. The policy implications are potentially profound. Despite the likely performance benefits, policymakers may be reluctant to privatize because of fears of job losses and wage cuts. The findings that average employment and wage losses tend to be low and that effects are sometimes positive should alleviate those fears. ELEVATOR PITCH Conventional wisdom and prevailing economic theory hold that the new owners of a privatized firm will cut jobs and wages. But this ignores the possibility that new owners will expand the firm's scale, with potentially positive effects on employment, wages, and productivity. Evidence generally shows these forces to be offsetting, usually resulting in small employment and earnings effects and sometimes in large, positive effects on productivity and scale. Foreign ownership usually has positive effects, and the effects of domestic privatization tend to be larger in countries with a more competitive business environment. KEY FINDINGS Cons Budget constraints are not infinitely soft, so stateowned firms have some incentives to economize. Negative consequences for employment and earnings are larger where state-owned firms are most protected, regulated, and subject to planning. The business environment and intensity of competition matter regardless of ownership. Limited evidence suggests that wage and employment losses are greatest for low-skilled workers.

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

Brown¹,

Earle

Telegdy

2009

The Economic Journal

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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.An extensive theoretical and empirical literature supports the hypothesis that privatisation tends to improve firm performance. The theoretical research elaborates mechanisms through which privatisation may increase efficiency and financial outcomes, and the empirical studies usually report positive impacts, although the estimates vary across countries, performance measures, econometric specifications and new types of owners. In a comprehensive survey of research in the 1990s on privatisation and performance, for instance, Megginson and Netter (2001, p. 381) conclude that privatised firms Ôalmost always become more efficientÕ; and in a meta-analysis of studies in transition economies, Djankov and Murrell (2002, p. 740) find that Ôprivatisation is strongly associated with more enterprise restructuring... .Õ More recently, in a paper using many more firms and longer panel data than had been available to previous researchers, we report positive effects of privatisation on productivity in Hungary and Romania, a weak positive effect in Ukraine, and a slight negative effect in Russia; in all four countries, the estimated effects of privatisation to foreign investors are larger than privatisation to domestic owners. 1 ). Our preferred domestic estimates of the multifactor productivity impact of privatisation lie in the range of 5% to 15% for Hungary, 14% to 24% for Romania, À3% to À5% for Russia, and 2% to 4% for Ukraine; the foreign estimates range from 18% to 55%. Djankov and Murrell (2002) also report larger effects for the Central and East European region compared to the Commonwealth of Independent States (CIS).

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Wages, Layoffs, and Privatization: Evidence from Ukraine

Cited by 11 publications

References 13 publications

Restructuring in privatised firms: A Statis approach

Restructuring in privatised firms: A Statis approach

Impact of privatization on employment and earnings

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

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