Privatization and Management Incentives in the Transition Period in Eastern Europe

Klaus Schmidt () and Monika Schnitzer ()

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

Abstract: The paper develops a simple theoretical framework in which the impact of different governance structures on management incentives, the efficiency of restructuring, and the social costs of the adjustment process in the transition period in Eastern Europe can be analyzed. The model shows that immediate privatization leads not only to strong management incentives to restructure but also to high social costs of bankruptcies and layoffs. If the government stays in control social costs will be lower. However, in this case managers face a soft budget constraint and have less incentive to restructure. The model also suggests which companies should be privatized first. J. Comp. Econom., June 1993, 17(2), pp 964-287. University of Bonn, D-531 13 Bonn, Germany.

Date: 1993-06
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Citations: View citations in EconPapers (28)

Published in Journal of Comparative Economics 2 17(1993-06): pp. 264-287

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Related works:
Journal Article: Privatization and Management Incentives in the Transition Period in Eastern Europe (1993)
Working Paper: Privatization and Management Incentives in the Transition Period in Eastern Europe (1993)
Working Paper: Privatization and Management Incentives in the Transition Period in Eastern Europe (1992)
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