Working Paper No. 1201

What is the Cost of Privatization for Workers?

Published: March 5, 2018, revised January 2019Pages: 43Keywords: Employment; Privatization; State-owned enterprises (SOEs); UnemploymentJEL-codes: J24; J63; L33; M51

What is the Cost of Privatization for Workers? Martin Olsson and Joacim Tåg

The world is in the midst of a wave of privatization of state-owned enterprises. We examine how privatization affects workers and how firm-level employment relates to worker-level estimates. Using administrative data from Sweden, we show that following a privatization workers’ unemployment incidence increases by a fifth and their number of unemployment days by a quarter. Labor earnings and labor force participation remain unchanged. Despite increased transitions to unemployment, employment at the firm-level remains unchanged suggesting that firm-level estimates don’t proxy well for worker-level outcomes. These results shed light on the welfare costs of privatization and how they can be mitigated.

Martin Olsson


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Joacim Tåg


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