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The political economy of mass privatization and the risk of expropriation

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  • Schmidt, Klaus M.

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.

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Bibliographic Info

Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 44 (2000)
Issue (Month): 2 (February)
Pages: 393-421

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Handle: RePEc:eee:eecrev:v:44:y:2000:i:2:p:393-421

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References

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  1. Schmidt,Klaus & Schnitzer,Monika, 1992. "Privatization and management incentives in the transition period in Eastern Europe," Discussion Paper Serie A 374, University of Bonn, Germany.
  2. Jean Tirole, 1991. "Privatization in Eastern Europe: Incentives and the Economics of Transition," NBER Chapters, in: NBER Macroeconomics Annual 1991, Volume 6, pages 221-268 National Bureau of Economic Research, Inc.
  3. Roland, Gérard & Verdier, Thierry, 1992. "Privatization in Eastern Europe: Irreversibility and Critical Mass Effects," CEPR Discussion Papers 612, C.E.P.R. Discussion Papers.
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Citations

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Cited by:
  1. Maw, James, 2002. "Partial privatization in transition economies," Economic Systems, Elsevier, vol. 26(3), pages 271-282, September.
  2. Ohlsson, Henry, 1998. "Ownership and Production Costs - Choosing Between Public Production and Contracting Out," Working Paper Series 1998:6, Uppsala University, Department of Economics.
  3. Kira Boerner, 2004. "The Political Economy of Privatization: Why Do Governments Want Reforms?," Working Papers 2004.106, Fondazione Eni Enrico Mattei.
  4. Börner, Kira, 2004. "The Political Economy of Privatization," Discussion Papers in Economics 296, University of Munich, Department of Economics.
  5. Anders Sundell & Victor Lapuente, 2012. "Adam Smith or Machiavelli? Political incentives for contracting out local public services," Public Choice, Springer, vol. 153(3), pages 469-485, December.
  6. Rudiger Ahrend & Carlos Winograd, 2006. "The Political Economy of Mass Privatisation and Imperfect Taxation: Winners and Losers," Documents de recherche 06-02, Centre d'Études des Politiques Économiques (EPEE), Université d'Evry Val d'Essonne.
  7. Francesc Trillas, 2004. "The structure of corporate ownership in privatized utilities," Investigaciones Economicas, Fundación SEPI, vol. 28(2), pages 257-284, May.
  8. Bruno Biais & Enrico Perotti, 2002. "Machiavellian Privatization," American Economic Review, American Economic Association, vol. 92(1), pages 240-258, March.
  9. Jiahua Che, 2003. "The Life Cycle of Government Ownership," William Davidson Institute Working Papers Series 2003-627, William Davidson Institute at the University of Michigan.
  10. Graeme Guthrie, 2006. "Regulating Infrastructure: The Impact on Risk and Investment," Journal of Economic Literature, American Economic Association, vol. 44(4), pages 925-972, December.
  11. Tian, Lihui, 2011. "Regulatory underpricing: Determinants of Chinese extreme IPO returns," Journal of Empirical Finance, Elsevier, vol. 18(1), pages 78-90, January.
  12. Antonio Estache & L. Wren-Lewis, 2008. "Towards a Theory of Regulation for Developing Countries: Following Laffont's Lead," Working Papers ECARES 2008_018, ULB -- Universite Libre de Bruxelles.
  13. Enrico C. Perotti & Pieter van Oijen, 1999. "Privatization, Political Risk and Stock Market Development in Emerging Economies," Tinbergen Institute Discussion Papers 99-033/2, Tinbergen Institute.
  14. Spanjer, Aldo, 2006. "European gas regulation: a change of focus," MPRA Paper 21146, University Library of Munich, Germany.
  15. Fidel Pérez Sebastián & Lilia Maliar & Serguei Maliar, 2005. "Sovereign Risk, Fdi Spillovers, And Economic Growth," Working Papers. Serie AD 2005-27, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  16. Börner, Kira Astrid, 2005. "Political Institutions and Incentives for Economic Reforms," Munich Dissertations in Economics 3165, University of Munich, Department of Economics.
  17. Christian Velasquez-Donaldson, 2007. "Analysis of the Hydrocarbon Sector in Bolivia: How are the Gas and Oil Revenues Distributed?," Development Research Working Paper Series 06/2007, Institute for Advanced Development Studies.
  18. Fardmanesh, Mohsen & Tan, Li, 2003. "Wage and price control policies in transition economies," Journal of Development Economics, Elsevier, vol. 70(1), pages 173-200, February.
  19. Cheikbossian, Guillaume, 2003. "Property rights, rent-seeking and aggregate outcomes in transition economies," Economic Systems, Elsevier, vol. 27(3), pages 271-288, September.

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