18 44. In contrast, competitive firms with relatively efficient pre-privatization staffing levels, as well as firms in high growth sectors such as telecommunications, have frequently experienced slight if any decline in employment. Often they have been sold with their labor force intact to private buyers who judged that they could employ all previously existing workers, or they were willing to take on surplus labor that they estimated could be absorbed by new investments and expansion. New investments and growth post-sale in fact increased employment in a good number of privatized firms (Galal, Jones, Tandon, and Vogelsang, 1994; Megginson, Nash, and van Randenborgh, 1994; Boubakri and Cosset, 1998; Kikeri, 1998). In a study of East European countries, the overall level of employment declined prior to and at privatization, but increased over time (Estrin and Svejnar, 1998). In a review of 17 privatizations, Van der Hoeven and Sziracki (1997) found job increases in four (averaging 23 percent) and no change in six; job losses occurred in seven cases (averaging a substantial 44 percent of the pre-sale workforce), though these involved highly overstaffed enterprises in protected sectors such as tobacco, water supply, and electricity.

45. Moreover, in many instances, and contrary to popular perception, those who retain their jobs in privatized firms receive higher wages, sometimes substantially so. In Brazil, employment reductions were sizable in large firms privatized in the 1990s (48 percent on average); but resulting productivity improvements from restructuring meant higher wages and performancebased incentives for workers who remain (Macedo, 2000). Similar evidence is also seen in Mexico (La Porta and Lopez-de-Silanes, 1997), Argentina (Ramamurti, 1997), and Malaysia (Galal et al, 1994).

46. Critical perceptions notwithstanding, privatization does not appear to be a main cause of perceived overall increases in unemployment and wage differentials. Data from Argentina, for example, suggests that privatization was not a major contributor to the rise in unemployment between 1993 and 1995, but the "Tequila Effect"-the interest rate shock-was (Chisari, Estache, Romero, 1999). In the early 1990s in Poland and Hungary, despite the slow pace of privatization, official unemployment grew rapidly, reaching 16.7 percent in Poland in 1993-94 (down to 9.6 percent in 1998), and 14.1 in Hungary-another cautious privatizer at the outset-in 1993 (down to 10.8 in 1996); lack of rapid and mass privatization thus did not prevent large unemployment increases (Nellis, 1999). Most persuasively, Behrman, Birdsall and Szekely (2000), in an econometric study of the impact of liberalizing economic reforms on wage differentials in Latin America, concluded that privatization was _negatively_ correlated with such increases. That is, privatization per se did not contribute to the growing wage inequality seen in reforming Latin American economies. Rather, privatization actually was mitigating the "disequalizing effects" of liberalizing reform in the financial sector, the tax regime, and capital markets. (This paper also indicates that the largest relative job losses due to privatization are found in the middle management ranks, and not in the classic blue collar positions, a finding encountered in other regions.) 47. The overall point is that the success or failure of a privatization program cannot be measured simply on the basis of whether the post-sale employment levels in the affected firms match those of the pre-sale period. Much of the shedding is due to the need for restructuring irrespective of privatization and to general economic conditions. Privatization must also be viewed as part of an overall reform program that stimulates competition, growth and productivity