The second variable is an index of labor firing costs constructed from legislation from Heckman and Pages (2001). This measure summarizes the tenure-severance pay profile using a common set of dismissal probabilities across countries and computes the expected future costs, at the time a worker is hired, of dismissing her in the future (also see Table 1).40 We find that the coefficients of both labor rigidity measures are negative but statistically non-significant using re-hires measures. This is also shown in the upper panel in Table 13. It appears that labor rigidities do not change the probabilities of re-hires when controlling for voluntary downsizing.

Re-hiring after privatization occurred not only at the firm level, but also in some instances, from the very same departments or areas from which the workers had been previously fired. When exploring this more restrictive measure of re-hires as the dependent variable we find that the coefficient of the voluntary downsizing variable is not statistically significant. This is shown in the lower panel in Table 13, specification 2. Data are the likely culprit of this result as only 4.7 percent of the sample re-hired in the same department or area, compared to more than 34 percent that simply re-hired. Thus, not too much weight should be attributed to this result.<sup>4</sup> 1 Additionally, and similar to the re-hires variable, labor rigidity measures yield negative and statistically non-significant coefficients with respect to the re-hires-same variable. This is also shown in the lower panel in Table 13.

Voluntary downsizing is only part of the story. In fact re-hires after privatizations are closely linked with the labor-administered process applied before privatization according to skills, age, and gender. This is shown in fist column in the upper panel of Table 14. Using re-hires as the dependent variable, we find that the age-targeted retrenchment variable yields a positive and statistically significant sign at 1 percent. Agetargeted retrenchment prior to privatization increases the probability of re-hiring by a huge 31 percent after privatization. On the other hand, the skill-targeted coefficient is negative and statistically significant at 5 percent. Skill targeting decreases the probability that firms will employ re-hires after privatization by 16 percent. Finally, the female-biased retrenchment is positive but it is not statistically significant. These results are quite consistent with our findings regarding net privatization prices. In fact, this finding suggests that adverse selection may be a problem as voluntary downsizing increases prices but age-biased downsizing reduces prices and increases the probability of re-hiring after privatization, while skill-biased downsizing marginally increases net privatization prices 40. Since the Heckman and Pages (2001) samnple is relatively limited we also use an alternative measure suggested by them, law origin. They show that French law origin is very highly correlated with labor separation costs. In fact, we find very similar results. We would be happy to provide these additional estimations upon request.

41. Another explanation may be related with the fact that enticing the best workers back after having them fired entails an additional cost. It is not easy to lure good workers back, especially given their potential alternatives outside. Additional pay, perks, or higher position may be necessary. The fact that the more restrictive measure of re-hires after privatization is not significantly linked with voluntary downsizing before privatization is not surprising.

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