Employment and Wage Adjustment: Insider-Outsider Control in a Polish Privatization Panel Study

We thank Marek Bednarski, Stanislawa Golinowska, Piotr Kurowski, Hans-Georg Petersen, Christoph Sowada, and Hans-Peter Weikard for their contributions to the survey. Financial support by the European Union's Phare ACE Programme, Grant P96-6227-R, and by the Komitet Badan Naukowych, Grant 02507, for carrying out the survey study is gratefully acknowledged. The paper was conceived while the first author was at the Institute of Public Finance, University of Potsdam, without the support and hospitality of which this work would not have been possible. We are particularly indebted to Marek Bednarski for numerous discusssions on the privatization process in Poland, to Piotr Kurowski for generous help with the data, and to Hans-Georg Petersen for encouragement and support in writing the paper. Michael Funke and Mike Nolan provided valuable comments early on. We are also grateful to Knut Bartels, Christhart Bork, Simeon Djankov, Hartmut Lehmann, Mark Schaffer, and seminar participants at Potsdam and St. Andrews for helpful comments. Earlier versions of the paper were presented at a CEPR/ZEI Bonn workshop on labor markets in transition in Vilnius (April, 2000) and at the Royal Economic Society meetings in St. Andrews (July, 2000). Two anonymous referees and the editor of the journal have been instrumental in improving the manuscript substantially. We thank Jochen Greiner-Mai for prompt and able assistance. All errors are our own. shocks have differing effects across ownership categories that are missed by the simpler and more aggregated specifications used in the previous literature. We confirm rent-seeking behavior in insider-controlled firms and find a significant employment growth-wage effect.