Privatization and Labor Force Restructuring around the World
Some critics of privatization argue that poor labor force restructuring is a key concern and that governments should establish better retrenchment programs. Using new data from a sample of 400 companies in the world, Chong and López-de-Silanes test...
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| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2014
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| Online Access: | http://documents.worldbank.org/curated/en/2002/09/2018944/privatization-labor-force-restructuring-around-world http://hdl.handle.net/10986/19280 |
| Summary: | Some critics of privatization argue that
poor labor force restructuring is a key concern and that
governments should establish better retrenchment programs.
Using new data from a sample of 400 companies in the world,
Chong and López-de-Silanes test competing theories about the
wisdom of retrenchment programs and their effect on prices
paid by buyers, and rehiring policies by private owners
after privatization. The results show that adverse selection
plagues retrenchment programs carried out by governments
before privatization. Controlling for endogeneity, several
labor retrenchment policies yield a negative impact on net
privatization prices. In confirmation of the adverse
selection argument, various types of voluntary downsizing
lead to a higher frequency of rehiring of the same workers
by the new private owners. Compulsory skill-based programs
are the only type of program that is marginally associated
with higher prices and lower rehiring rates after
privatization, but the political and economic costs of this
policy may make it somewhat impractical. While a qualified
non-intervention policy appears to be the safest bet in
labor retrenchment before privatization, another one might
be to set up a social safety net or labor reallocation
program before privatization, and then let the new private
owners decide who is redundant and who is not. Setting up
the program before privatization may help with the political
viability of the process and letting the new owners manage
the retrenchment may help avoid adverse selection. |
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