Impacts of Privatization on Employment – Evidence from China

Lingwen Huang, Yang Yao
JEL codes: 
China Center for Economic Research NO. E2006008 June 5, 2006

This paper evaluates the impact of privatization on firm employment using a panel dataset of 386 firms in China in the period 1995-2001. Controlling firm and year fixed effects, our panel regressions find that employment grows faster in privatized firms than in pure state-owned firms by a margin of 17.7 percentage points over the base year of 1995. We also study the dynamic impact of privatization on employment growth and find that the performance of privatized firms improves over time. These findings are robust even after we control other performance and financial variables as well as the pre-privatization employment history of privatized firms. In addition, we employ the difference-in-dffierence propensity score matching method to check the robustness of
our results. The estimates cofinrm the regression-based results.