specifications. One could argue that the nature of<sup>the program itself, typicallybased on</sup> written exarns or panel reviews, may partly explain<sup>these results. Unfortunately,this</sup> policy is one of the most politically difficult to implement<sup>by thegovernment and requires</sup> a tough stance from the authority. Results show that<sup>the managerialquality of the</sup> government may have an impact in the results, but<sup>asa generalpolicy it appearsthat not</sup> much time and effort should be spent on labor restructuring<sup>before privatization.</sup> The paper is organized as follows. The next<sup>section describes the data collection</sup> process and discusses the empirical methodology. In<sup>section 3, we test whetherlabor</sup> restructuring has an impact on privatization prices<sup>and whether such resultshold when</sup> failed privatization and or potential endogeneity<sup>are taken intoaccount.Section 4 extends</sup> our results on prices for specific types of downsizing<sup>measures. Section5 providesa new</sup> look at the effect on prior downsizing by the government<sup>by analyzing the natureof post-</sup> privatization re-hires by private owners. Section<sup>6 concludes.</sup>

# **2.** Data **and** Methodology

Our sample was formed based on a list compiled by<sup>the authors of about1,500</sup> privatizations around the world covering the period<sup>1982-2000.3The two main sources for</sup> this list are the World Bank Privatization database<sup>andPrivatisationInternational,which</sup> together arguably provide the largest source of privatization<sup>transactionsin the world.</sup> From this original list, we selected a random sample<sup>of 400 bigand small firms to whom</sup> we sent a detailed questionnaire designed by the<sup>authors.The questionnaire wasaddressed</sup> to the CEO with a recommendation to direct it to the chief<sup>financial officerand the</sup> director of human resources of the firm.<sup>4</sup> In order to ensure the quality of our data, we employed<sup>four additionalsources.</sup> First, we took advantage of the fact that in several<sup>developing countriesmany</sup> privatizations have been performed as part of structural<sup>adjustmentor otherlending</sup> programs with the support of the World Bank.<sup>Wewereable toaccess a widerange of</sup> World Bank's internal documents to double check and<sup>in some instances,complement the</sup> information collected in our survey. In particular,<sup>we madeextensive use of the World</sup> Bank's electronic Intranet system called _ImageBank,_<sup>whichallowsfullaccess to such</sup> documents.<sup>5</sup> Second, we also made broad use of _NEXIS_<sup>to search for a number of national</sup> 3. We excluded voucher privatizations. As it has been<sup>discussedelsewhere,there are fundamental</sup> differences between such privatization technique and<sup>others,which wouldhave madecomparisons</sup> particularly difficult (Boycko, Shleifer, and Vishny,<sup>1994).</sup> 4. While directors of human resources answered 71.4<sup>percent of the laborpart of thequestionnaires,</sup> public relations managers answered 16.6 percent of<sup>them.Personnelworking at human resources</sup> departments other than managers answered about<sup>5.5percent, and personnelworking at public relations</sup> answered 6.5 percent, usually on behalf of managers.<sup>Financialinformationwastypically provided by the</sup> office of the chief financial officer or, in the case of<sup>smallfimns,by theofficeof the CEO.</sup> 5. Typical World Bank documents include Country<sup>EconomicReports,Staff Appraisal Reports,</sup> President's Reports, Supervision documents, Project<sup>CompletionReports,AuditReports,Operation</sup> Evaluation Studies, and Sector Reports. We covered<sup>about63.4percent of the sample.</sup> 3