Restructuring of Public Enterprises udner Political Constraint

Dong Keun Cho
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Dong Keun Cho: Myongji University

Korean Economic Review, 1996, vol. 11, issue 2, 5-22

Abstract: A typical public enterprise suffering from low productivity and overemployment may be reformed by removing protective measures and/or offering new incentive schemes. This paper addresses issues of resturcturing through incentive wage scheme. The key factor in the process of restructuring is the possible resistance of existing workers to reform plan. Hence, political constraint which requires utility level under reform to be at least equal to pre-reform level incurs substantial financial costs of reform. This paper follows to the spirit of Dewatripont and Roland ( 1992), but ela-borates and enriches their model to analyse the optimal static and dynamic reform plan under general settings along game theoretic approach.

Date: 1996
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