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Enterprise Reform in Eastern Europe

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  • van Wijnbergen, Sweder

Abstract

Eastern Europe is not well served with straightforward textbook advice. The common wisdom on privatization fails to address the problems created by diffuse ownership and control prior to privatization. Cash auctions may not efficiently match managers and capital stock because of wealth constraints. Standard advice on enterprise restructuring fails to incorporate the effect of the sheer scale of the problem, and the reasons why current profits are a poor guide to future profit opportunities. Finally, introducing Western style unemployment insurance, while lowering the social costs of unemployment, would almost certainly also contribute to its indefinite extension. This paper shows how such problems can be addressed by incorporating incentive problems specific to Eastern Europe into policy design. Sometimes the resulting advice is novel and as yet untried; in some cases successful examples exist. Thus some experimentation is unavoidable. The alternative, however, is declining incomes and increasing social unrest as the consensus underlying the reforms erodes.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 738.

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Date of creation: Nov 1992
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Handle: RePEc:cpr:ceprdp:738

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Related research

Keywords: Bank Reform; Eastern Europe; Enterprise Restructuring;

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References

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  1. Philippe Aghion & Oliver Hart & John Moore, 1992. "The Economics of Bankruptcy Reform," CEP Discussion Papers dp0093, Centre for Economic Performance, LSE.
  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.
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Citations

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Cited by:
  1. Aizenman, Joshua & Isard, Peter, 1996. "Production bottlenecks and congestion externalities during the transition to a market economy," International Review of Economics & Finance, Elsevier, vol. 5(3), pages 225-241.
  2. Buch, Claudia M., 1995. "Bank behavior and bad loans: Implications for reforms in Eastern Europe," Kiel Working Papers 679, Kiel Institute for the World Economy.
  3. Buch, Claudia M., 1995. "The emerging financial systems of the Eastern European economics: A progress report," Kiel Working Papers 716, Kiel Institute for the World Economy.
  4. Buch, Claudia M., 1993. "An institutional approach to banking reform in Eastern Europe," Kiel Working Papers 560, Kiel Institute for the World Economy.

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