The restructuring process of formerly state owned enterprises, including dismissal of excess labour, has been slow. Since the recovery of transition economies depends on the restructured sector, a convincing take-off has been delayed. Many arguments have been forwarded to explain the low adaptation speed. This paper focuses on an additional structural barrier at the governmental level. Here the privatisation program - leading to restructuring or not - is designed. Transition governments are in a fiscal squeeze: on the one hand restructuring relocates costs from the restructured firms to the public budget, on the other hand - in order to contain inflationary pressures - the public deficit should be kept within narrow limits. This problem is analysed by means of a stylized, dynamic model.
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Paper provided by School of Economics and Management, University of Aarhus in its series Economics Working Papers with number
1998-2.
Find related papers by JEL classification: H69 - Public Economics - - National Budget, Deficit, and Debt - - - Other L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Boundaries of Public and Private Enterprise; Privatization; Contracting Out P41 - Economic Systems - - Other Economic Systems - - - Planning, Coordination, and Reform
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