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Restructuring of State-Owned Enterprises and Workers: Evidence from East Germany

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  • Hennicke, Moritz

Abstract

I study the impact on workers of restructuring communist firms during the transition to capitalism. Drawing on close to the universe of communist state-owned enterprises under the authority of the German privatization agency in the 1990ies, I am able to link firms across industries and districts to workers and their labor market outcomes before and after exposure to firm restructuring. I study effects of two treatments: First, I find that the advent of market competition through firm closures by the privatization agency increases unemployment. Second, I estimate that the genesis of private ownership in the form of privatizations lowers household income and well-being of workers. To explore the role of ownership, I conduct event studies at the firm level and find that privatized firms downsize compared to firms remaining state-owned. Building a conceptual framework on the idea that the transition implied large temporary uncertainties, the shrinking of privatized firms might have followed from a higher desire by private owners to reduce exposure to risk as opposed to the state.

Suggested Citation

  • Hennicke, Moritz, 2023. "Restructuring of State-Owned Enterprises and Workers: Evidence from East Germany," OSF Preprints jext7, Center for Open Science.
    • Handle: RePEc:osf:osfxxx:jext7
    DOI: 10.31219/osf.io/jext7
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    References listed on IDEAS

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    1. Ichiro IWASAKI & Satoshi MIZOBATA, 2018. "Post-Privatization Ownership And Firm Performance: A Large Meta-Analysis Of The Transition Literature," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 89(2), pages 263-322, June.
    2. Alexander Eickelpasch, 2015. "Structural Differences at the Root of East-West Gap in Research, Development, and Innovation in Germany," DIW Economic Bulletin, DIW Berlin, German Institute for Economic Research, vol. 5(41), pages 541-552.
    3. Sun, Liyang & Abraham, Sarah, 2021. "Estimating dynamic treatment effects in event studies with heterogeneous treatment effects," Journal of Econometrics, Elsevier, vol. 225(2), pages 175-199.
    4. Jeffry M. Netter & William L. Megginson, 2001. "From State to Market: A Survey of Empirical Studies on Privatization," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 321-389, June.
    5. Boycko, Maxim & Shleifer, Andrei & Vishny, Robert W, 1996. "A Theory of Privatisation," Economic Journal, Royal Economic Society, vol. 106(435), pages 309-319, March.
    6. Ghazala Azmat & Alan Manning & John Van Reenen, 2012. "Privatization and the Decline of Labour's Share: International Evidence from Network Industries," Economica, London School of Economics and Political Science, vol. 79(315), pages 470-492, July.
    7. Athey, Susan & Imbens, Guido W., 2022. "Design-based analysis in Difference-In-Differences settings with staggered adoption," Journal of Econometrics, Elsevier, vol. 226(1), pages 62-79.
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