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Privatization, Market Liberalization, and Learning in Transition Economies

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  • Gordon C. Rausser
  • Leo K. Simon

Abstract

Privatization and market liberalization are widely considered to be complementary reforms in transition economies. This article challenges this view and the closely related “big bang” approach: when pursued too vigorously, privatization may impede the transition process following liberalization. Our result is based on an explicit model of market learning. Compared to a mature market, a market in transition is characterized by greater uncertainty regarding market conditions, including equilibrium prices and quantities. Economic actors must learn about these conditions through their participation in the market process. Less than full privatization is optimal if the costs of learning are sufficiently important. Copyright 1998, Oxford University Press.

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Bibliographic Info

Article provided by Agricultural and Applied Economics Association in its journal American Journal of Agricultural Economics.

Volume (Year): 80 (1998)
Issue (Month): 4 ()
Pages: 724-737

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Handle: RePEc:oup:ajagec:v:80:y:1998:i:4:p:724-737

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  1. Hare, Paul G & Hughes, Gordon & Michael, Thomas & Revesz, Tamas, 1992. "The Competitiveness of Hungarian Industry," CEPR Discussion Papers 736, C.E.P.R. Discussion Papers.
  2. Lucas, Robert Jr., 1972. "Expectations and the neutrality of money," Journal of Economic Theory, Elsevier, vol. 4(2), pages 103-124, April.
  3. Dewatripont, Mathias & Roland, Gérard, 1993. "The Design of Reform Packages Under Uncertainty," CEPR Discussion Papers 860, C.E.P.R. Discussion Papers.
  4. Dewatripont, M & Roland, G, 1992. "Economic Reform and Dynamic Political Constraints," Review of Economic Studies, Wiley Blackwell, vol. 59(4), pages 703-30, October.
  5. Townsend, Robert M, 1978. "Market Anticipations, Rational Expectations, and Bayesian Analysis," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 19(2), pages 481-94, June.
  6. Peter Murrell, 1991. "Can Neoclassical Economics Underpin the Reform of Centrally Planned Economies?," Journal of Economic Perspectives, American Economic Association, vol. 5(4), pages 59-76, Fall.
  7. Bray, Margaret M & Savin, Nathan E, 1986. "Rational Expectations Equilibria, Learning, and Model Specification," Econometrica, Econometric Society, vol. 54(5), pages 1129-60, September.
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Cited by:
  1. Mei Wen, 2005. "Foreign Direct Investment, Regional Geographical and Market Conditions, and Regional Development: A Panel Study on China," Departmental Working Papers 2005-12, The Australian National University, Arndt-Corden Department of Economics.
  2. Koptchenov, Alexei A. & Ames, Glenn C.W., 1999. "The Russian Economic Crisis: Impact On Agriculture And Higher Education In The Chelyabinsk Oblast, Ural Region," Faculty Series 16727, University of Georgia, Department of Agricultural and Applied Economics.
  3. Nauro F. Campos & Roman Horváth, 2006. "Reform Redux: Measurement, Determinants and Reversals," Working Papers IES 2006/16, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Apr 2006.
  4. Goel, Rajeev K. & Budak, Jelena, 2006. "Privatization in transition economies: Privatization scale and country size," Economic Systems, Elsevier, vol. 30(1), pages 98-110, March.
  5. Odhiambo, Mark O. & Oluoch-Kosura, Willis & Kibiego, Michael B., 2006. "Analysis of the Structure and Performance of the Beans Marketing System in Nairobi," 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia 25440, International Association of Agricultural Economists.

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