The Distribution of Assets in Transitional Economies

Juha Honkkila

No 295369, WIDER Working Papers from United Nations University, World Institute for Development Economic Research (UNU-WIDER)

Abstract: An equal distribution of assets is a crucial element in the process of economic transition from plan to market. In the socialist era most physical assets were owned by the state and private ownership was not very important for most individuals. When the state abandons the socialist system and privatizes most of the formerly state-owned property, it also gives up the provision of secure employment, low-priced housing and the subsidies to industry, agriculture and private consumption. The relevance of private ownership grows, but how fast it does and in which way the new 'culture' of property rights is created, depends widely on the initial conditions and on the different privatization approaches. Although privatizing state-owned assets involves a transfer of huge amounts of public property into the hands of private persons, this process may lead to an increase in poverty and inequality.Empirical research on asset distribution in transitional economies has been limited, mainly because of the inaccuracy of statistical data in this area. Still, the increase in poverty and income inequality during the transition period seems to suggest an increase in asset concentration. This research analyzes the changes in asset distribution by comparing the performance of different transitional economies in terms of their initial conditions and different privatization programs, and draws some conclusions from the point of view of the distribution of assets. While this gives some information on how privatization can affect the distribution of physical capital over the short term, the long term effects are also briefly discussed at the end of this paper, where it is emphasized, that secondary markets for privatized assets can change radically the distribution of assets generated by the initial measure in the field of privatization.

Keywords: International; Development (search for similar items in EconPapers)
Pages: 40
Date: 1996-10
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Persistent link: https://EconPapers.repec.org/RePEc:ags:widerw:295369

DOI: 10.22004/ag.econ.295369

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