The effect of employee ownership on employment and wages: evidence from Romania

This paper analyzes the effect of employee ownership on employment and wages in Romania using a firm-level data for Romanian enterprises for years 1992-2005. Insider ownership in Romania emerged as a result of Management-Employee Buyouts (MEBOs). I find that employee ownership has a positive effect on employment independently on the size of employee ownership. Employee ownership is also associated with slightly lower wages compared to state-owned firms, but I find no difference between employee-owned and other private domestically-owned firms in this respect (assuming similar selection mechanisms). I find no evidence of higher employment and lower wages on future employee-owned firms before the privatization and it can be concluded that Romanian MEBO firms place more emphasis on employment than on wages.