Privatisation, Corporate Control and Employment Growth:Evidence From A Panel of Large Polish Firms, 1996-2002

Using panel data on large Polish firms this paper examines the relationship between corporatecontrol structures, sales growth and the determinants of employment change during the period 1996-2002. We find that privatised and de novo firms are the main drivers of employment growth andthat, in the case of de novo firms, it is foreign ownership which underpins the result. Interestingly,we find that being privatised has a positive impact on employment growth but that this impact isconcentrated within a range of three to six years after privatisation. In contrast with the findings ofearlier literature, we find evidence that there are no systematic differences in employment responseto negative sales growth across the ownership categories. On the other hand, employment in statefirms is less responsive to positive sales growth. From these combined results we infer that thebehaviour of state firms is constrained by both insider rent sharing and binding budget constraints.Consistent with this, we find that privatised companies, three to six years post-privatisation, are thefirms for whom employment is most responsive to positive sales growth and as such, offer the besthope for rapid labour market expansion....