Using propensity matching estimators to evaluate the impact of privatisation on wages

Abstract

Whether the transfer of ownership rights to the private sector leads to a decline or increase in wage growth is theoretically ambiguous, given that the outcome depends on the uncertain interaction between firms and workers. Using propensity matching techniques, this paper investigates the effects of privatisation on wages in the Portuguese banking industry. The empirical results, obtained from Quadros de Pessoal for the period between 1989 and 1997, generally show a negative (positive) short-run (long-run) effect of privatisation on relative wage growth for both men and women retained in the privatised firms. Moreover, the results show that the most educated and experienced (oldest) workers, as well as those in the high skill occupational categories, were more likely to experience a negative wage effect.