Mass Privatisation and Partial State Ownership of Firms in Transition Economics

John Bennett, Saul Estrin and James Maw

No 2895, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: In their privatization programs, transition governments have frequently given away shares (so-called `mass privatization'), while maintaining significant minority ownership. We explain the rationality of these policies for an expected net-revenue maximizing government. Our argument rests on a political feasibility constraint, preventing sale at a negative price. This constraint both raises prices that would otherwise be negative to zero, and has an indirect effect: mass privatization and partial retained state ownership may be chosen even if sale of a firm's entire assets would fetch a positive price. They are more likely to be chosen if the government has low bargaining power.

Keywords: Privatisation; Transition economies; State ownership (search for similar items in EconPapers)
JEL-codes: L33 P21 (search for similar items in EconPapers)
Date: 2001-09
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Citations: View citations in EconPapers (12)

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