Managerial Career Concerns, Privatization and Restructuring in Transition Economies

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Managerial Career Concerns, Privatization and Restructuring in Transition Economies

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Roland, Gérard
Sekkat, M. Khalid

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Abstract

We set up a dynamic adverse selection model to explain how career concerns may induce managers in state-owned enterprises (SOEs) to restructure their firms. It is shown how government monopsony power over managers led to the ratchet effect under the socialist economy, even under reforms coming short of privatization. The introduction of a managerial labour market, through privatization, introduces competition for managers and eliminates the ratchet effect, thereby inducing managers to restructure. Prospects of privatization also provide incentives to restructure even when managerial skills are asset-specific, provided insider control is strong enough to give managers enough rents from privatization. The model is consistent with the empirical evidence on restructuring of SOEs in transition economies.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 1363.

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Date of creation: Mar 1996
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Handle: RePEc:cpr:ceprdp:1363

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Article
- Roland, Gerard & Sekkat, Khalid, 2000. "Managerial career concerns, privatization and restructuring in transition economies," European Economic Review, Elsevier, vol. 44(10), pages 1857-1872, December. [Downloadable!] (restricted)

Find related papers by JEL classification:
D29 - Microeconomics - - Production and Organizations - - - Other
H39 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Other
P29 - Economic Systems - - Socialist Systems and Transition Economies - - - Other

Cited by:
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Jurajda, Stepán & Terrell, Katherine, 2002. "Job Growth in Early Transition: Comparing Two Paths," IZA Discussion Papers 589, Institute for the Study of Labor (IZA). [Downloadable!]
Other versions:
- Stepan Jurajda & Katherine Terrell, 2002. "Job Growth in Early Transition: Comparing Two Paths," William Davidson Institute Working Papers Series 503, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
- Stepan Jurajda & Katherine Terrell, 2002. "Job Growth in Early Transition: Comparing Two Paths," CERGE-EI Working Papers wp201, The Center for Economic Research and Graduate Education - Economic Institute, Prague. [Downloadable!]
- Stepán Jurajda & Katherine Terrell, 2003. "Job growth in early transition: Comparing two paths ," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 11(2), pages 291-320, June. [Downloadable!] (restricted)
J. David Brown & John Earle & Almos Telegdy, 2005. "The Productivity Effects of Privatization: Longitudinal Estimates from Hungary, Romania, Russia, and Ukraine," CERT Discussion Papers 0508, Centre for Economic Reform and Transformation, Heriot Watt University. [Downloadable!]
Other versions:
- J. David Brown & John S. Earle & Almos Telegdy, 2005. "The Productivity Effects of Privatization: Longitudinal Estimates from Hungary, Romania, Russia, and Ukraine," Staff Working Papers 05-121, W.E. Upjohn Institute for Employment Research. [Downloadable!] (restricted)
- J. David Brown & John S. Earle & Almos Telegdy, 2006. "The Productivity Effects of Privatization: Longitudinal Estimates from Hungary, Romania, Russia, and Ukraine," Journal of Political Economy, University of Chicago Press, vol. 114(1), pages 61-99, February. [Downloadable!] (restricted)
Richard B. Goud Jr., 2002. "Ownership and Firm Performance: Evidence from 25 Countries in Central and Eastern Europe and the Former Soviet Union," Development and Comp Systems 0207002, EconWPA. [Downloadable!]
J. David Brown & John S. Earle & Almos Telegdy, 2005. "Does Privatization Hurt Workers? Lessons from Comprehensive Manufacturing Firm Panel Data in Hungary, Romania, Russia, and Ukraine," Staff Working Papers 05-125, W.E. Upjohn Institute for Employment Research. [Downloadable!] (restricted)
Other versions:
- J. David Brown & John Earle & Almos Telegdy, 2005. "Does Privatization Hurt Workers? Lessons from Comprehensive Manufacturing Firm Panel Data in Hungary, Romania, Russia, and Ukraine," CERT Discussion Papers 0509, Centre for Economic Reform and Transformation, Heriot Watt University. [Downloadable!]
- J. David Brown & John S. Earle & Álmos Telegdy, 2006. "Does Privatization Hurt Workers? Lessons from Comprehensive Manufacturing Firm Panel Data in Hungary, Romania, Russia and Ukraine," Budapest Working Papers on the Labour Market 0510, Institute of Economics, Hungarian Academy of Sciences, revised 12 Jan 2006. [Downloadable!]
Susan Linz, 2000. "Restructuring with What Success? A Case Study of Russian Firms," William Davidson Institute Working Papers Series 324, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
J. David Brown & John S. Earle & Almos Telegdy, 2004. "Does Privatization Raise Productivity? Evidence from Comprehensive Panel Data on Manufacturing Firms in Hungary, Romania, Russia, and Ukraine," Staff Working Papers 04-107, W.E. Upjohn Institute for Employment Research. [Downloadable!] (restricted)
Other versions:
- J. David Brown & John S. Earle & Almos Telegdy, 2004. "Does Privatization Raise Productivity? Evidence from Comprehensive Panel Data on Manufacturing Firms in Hungary, Romania, Russia and Ukraine," IEHAS Discussion Papers 0425, Institute of Economics, Hungarian Academy of Sciences. [Downloadable!]
- Brown, J David & Earle, John S, 2004. "Does Privatization Raise Productivity? Evidence from Comprehensive Panel Data on Manufacturing Firms in Hungary, Romania, Russia and Ukraine," CEPR Discussion Papers 4791, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
- J. David Brown & John Earle & Almos Telegdy, 2004. "Does Privatization Raise Productivity? Evidence from Comprehensive Panel Data on Manufacturing Firms in Hungary, Romania, Russia, and Ukraine," CERT Discussion Papers 0410, Centre for Economic Reform and Transformation, Heriot Watt University. [Downloadable!]
Norbäck, Pehr-Johan & Persson, Lars, 2003. "Privatization and Restructuring in Concentrated Markets," Working Paper Series 605, Research Institute of Industrial Economics. [Downloadable!]
Other versions:
- Norbäck, Pehr-Johan & Persson, Lars, 2005. "Privatization and Restructuring in Concentrated Markets," CEPR Discussion Papers 4871, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
- Pehr-Johan Norback & Lars Persson, 2004. "Privatization and Restructuring in Concentrated Markets," Working Papers 2004.107, Fondazione Eni Enrico Mattei. [Downloadable!]
John Bennett & Saul Estrin & James Maw & Giovanni Urga, 2004. "Privatisation Methods and Economic Growth in Transition Economies," Working Papers 2004.105, Fondazione Eni Enrico Mattei. [Downloadable!]
Other versions:
- Bennett, John & Estrin, Saul & Maw, James & Urga, Giovanni, 2004. "Privatization Methods and Economic Growth in Transition Economies," CEPR Discussion Papers 4291, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
J. David Brown & John S. Earle, 2007. "The Productivity Effects of Privatization in Ukraine: Estimates from Comprehensive Manufacturing Firm Panel Data, 1989–2005," Staff Working Papers 07-137, W.E. Upjohn Institute for Employment Research. [Downloadable!] (restricted)

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