The political economy of mass privatization and the risk of expropriation

Klaus Schmidt ()

Munich Reprints in Economics from University of Munich, Department of Economics

Abstract: The privatization process in Eastern Europe is not irreversible. Future governments may want to (partially) expropriate successful private firms in order to subsidize unsuccessful ones. We use a simple median voter model to predict the policy of future governments. It is shown that there will be less expropriation the more shares were distributed for free to the population. Diversified mass privatization is better than insider privatization. Furthermore, people should be discouraged to sell their shares for cash. Finally, we show that some free distribution of shares may induce more investment and increase expected profits and privatization revenues for the government.

Date: 2000
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Published in European Economic Review 2 44(2000): pp. 393-421

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Related works:
Journal Article: The political economy of mass privatization and the risk of expropriation (2000)
Working Paper: The Political Economy of Mass Privatization and the Risk of Expropriation (1998)
Working Paper: The Political Economy of Mass Privatization and the Risk of Expropriation (1997)
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