We present a general equilibrium model of imperfect competition to analyze different policy measures in transition economies. Due to strategic complementarities in technology choice and demand spillovers, the possibility of multiple macroeconomic equilibria arises. Those equilibria can be Pareto-ranked. Equilibria where modern technologies are employed are preferable. Technology adoption crucially depends on how property rights are distributed and which method of privatization is chosen. The existence and occurrence of 'good' equilibria is extremely fragile with respect to policy. Contrary to conventional wisdom, we show that a broad distribution of ownership rights can have favorable influence on micro-economic efficiency and may therefore lead to a 'good' aggregate outcome. Sales to single or core investors, if accompanied by workers' equity shares, may perform worse. Furthermore only a Big Bang approach to privatization might lead to favorable outcomes.
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Paper provided by University of Bonn, Germany in its series Discussion Paper Serie A with number
474.
Length: Date of creation: 16 Mar 1995 Date of revision: Handle: RePEc:bon:bonsfa:474
Contact details of provider: Postal: Bonn Graduate School of Economics, University of Bonn, Adenauerallee 24 - 26, 53113 Bonn, Germany Fax: +49 228 73 9221 Web page: http://www.bgse.uni-bonn.de/index.php?id=517
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Find related papers by JEL classification: O33 - Economic Development, Technological Change, and Growth - - Technological Change - - - Technological Change: Choices and Consequences; Diffusion Processes P00 - Economic Systems - - General - - - General E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
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