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Privatization and Changes in the Wage Structure: Evidence from Firm Personnel Records

Author

Listed:
  • Melly, Blaise

    (Brown University)

  • Puhani, Patrick A.

    (Leibniz University of Hannover)

Abstract

We investigate the wage effects of privatization using person-level firm-based panel datasets from one privatized and one nonprivatized public sector firm in the same country for the years immediately before and after privatization. Thus, we can analyze the before-after effects of privatization while controlling for individual and time fixed effects and allowing for firm-specific trends. Because the change in wage regime coincides with substantial losses in the market share of the privatized but not the nonprivatized firm, the situation approximates a natural experiment in switching workers from the public to the private sector. We find significant changes in the wage structure of the privatized but not the nonprivatized firm. Specifically, wage and wage growth distributions widened significantly after privatization. Conditioning on worker characteristics, we find that younger employees and those with shorter tenure gained from privatization, while high-skilled workers gained relative to medium-skilled workers. Surprisingly, low-skilled workers also gained, although seemingly in the form of temporary compensation intended to increase acceptance of privatization.

Suggested Citation

  • Melly, Blaise & Puhani, Patrick A., 2008. "Privatization and Changes in the Wage Structure: Evidence from Firm Personnel Records," IZA Discussion Papers 3760, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp3760
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    Cited by:

    1. Clark, Andrew E. & Milcent, Carine, 2011. "Public employment and political pressure: The case of French hospitals," Journal of Health Economics, Elsevier, vol. 30(5), pages 1103-1112.
    2. Yuval Mazar, 2018. "Differences in Skill Levels of Educated Workers Between the Public and private Sectors, the Return to Skills and the Connection between them: Evidence from the PIAAC Surveys," Bank of Israel Working Papers 2018.01, Bank of Israel.

    More about this item

    Keywords

    liberalization; competition; labor markets; wage distributions; privatization;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J45 - Labor and Demographic Economics - - Particular Labor Markets - - - Public Sector Labor Markets
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out

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