Macroeconomic implications of voucher privatization in a model with incomplete information

Damien Besancenot and Radu Vranceanu

Journal of Economic Policy Reform, 2001, vol. 4, issue 2, 147-164

Abstract: Voucher privatization implies a significant wealth transfer from state to private agents who, in turn, would increase consumption. This paper investigates the consequences of this wealth effect on the macroeconomic equilibrium in a high unemployment economy. The model builds on a two-stage sequential game between the government and private agents. We verify the existence of a pooling equilibrium in which private agents cannot guess whether a policy of fast privatization will be continued in the future or not. This configuration presents an endogenous probability of privatization slowdown; as a consequence, the wealth effect is moderated and the genuine fast privatizer government bears an “undue” credibility cost in terms of employment

Date: 2001
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DOI: 10.1080/13841280008523417

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