THE IMPACT OF PRIVATIZATION ON THE EARNINGS OF RESTRUCTURED WORKERS

Abstract: We study the long-term impact of job displacement from a big state owned enterprise as a result of its privatization in a developing country. Our results suggest large reductions in earnings, which persist throughout the years. However, we also find that the displaced worker’s post-displacement earnings are in line with competitive market wages, and unrelated to sector of employment or to tenure losses, indicating that the long-term reduction in earnings as a result of displacement because of privatization can be traced to the loss of wage rents. Our results indicate that job displacement in SOEs may have very large redistributive implications for the workers involved but that this loss does not reflect the loss of specific human capital associated to these jobs