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John S. Earle - Does privatization lead to job losses and wage cuts?

John S. Earle - Does privatization lead to job losses and wage cuts?

Does privatization lead to job losses and wage cuts?
I think a lot of people will expect privatization to lead to job losses and wage cuts, I’m not sure that’s conventional wisdom; I don’t know that there’s a whole lot of wisdom out there on the topic. Until recently there wasn’t very much research about it. That’s mostly because there have not been a lot of privatizations around the world, until starting about twenty years ago in eastern Europe.

Those privatizations that did happen in countries like United Kingdom, there were few of them and it was difficult to find other firms that were similar to compare them with, and so usually when we’re interested in the effect of some policy or some variable on another variable, we would like to have a group of observations that are not affected by the policy.

So, in eastern Europe you had a kind of experiment where within industries you have firms that are very similar and some of them were privatized and others were not. Some were privatized early some were privatized later on, and so there was the possibility to actually compare similar firms so of which were privatized and some of which were not.

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