Non-wage benefits, corporate ownership and firm performance in post-communist economies: evidence from Ukraine

Abstract

The economic reforms in the transition economies of Central and Eastern Europe have fundamentally reshaped ownership and governance of economic production, notably through the privatization of former state-owned enterprises. These reforms were expected to transform management practices by displacing ‘cradle-to-grave’ welfare arrangements administered by state-owned enterprises. Using data drawn from two large samples of Ukrainian establishments, we investigate, in two different time points, the relationship between non-wage benefits and firm performance during the period of transition to a market economy (1994–2004). We found that non-wage benefits continued to be a critical feature of HRM practices in Ukraine during this period, and were positively associated with firm performance.

Keywords:

• Firm performance
• non-wage benefits
• privatization
• transition economies

Notes

1. Capelli and Neumark (2001) have also argued that financial measures, such as profitability, may not be the most appropriate measures to assess performance in multi-establishment firms. This is so because firms may use different methods for calculating internal measures of plant-level performance, particularly where some production costs may be borne by the firm rather than the establishment.

2. In the Delta parameterization, scale factors for continuous latent response variables of observed categorical dependent variables are allowed to be parameters in the model, but residual variances for continuous latent response variables are not; as opposed to the Theta parameterization, where residual variances for continuous latent response variables of observed categorical-dependent variables are allowed to be parameters in the model, but scale factors for continuous latent response variables are not. In both cases, however, WLSMV produces Probit estimates.

3. The variables canteen/meal for regular workers, consumption goods for regular workers and consumption goods for non-regular workers were defined as ‘consumption benefits’. Health services for regular workers, health services for non-regular workers, subsidized rent for regular workers, subsidized rent for non-regular workers, kindergartens for regular workers, kindergartens for non-regular workers were labeled welfare benefits.