The political economy of mass privatization and the risk of expropriation
The privatization process in Eastern Europe is not irreversible. Future governments may want to (partially) expropriate successful private firms in order to subsidize unsuccessful ones. We use a simple median voter model to predict the policy of future governments. It is shown that there will be less expropriation the more shares were distributed for free to the population. Diversified mass privatization is better than insider privatization. Furthermore, people should be discouraged to sell their shares for cash. Finally, we show that some free distribution of shares may, induce more investment and increase expected profits and privatization revenues for the government.
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- 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.
- Roland, G. & Verdier, T., 1991.
"Privatization in Eastern Europe: Irreversibility and Critical Mass Effects,"
DELTA Working Papers
91-21, DELTA (Ecole normale supérieure).
- Roland, Gerard & Verdier, Thierry, 1994. "Privatization in Eastern Europe : Irreversibility and critical mass effects," Journal of Public Economics, Elsevier, vol. 54(2), pages 161-183, June.
- Roland, G. & Verdier, T., 1991. "Privatisation in Eastern Europe: Irreversibility and Critical Mass Effects," Papers 9105, Universite Libre de Bruxelles - C.E.M.E..
- Roland, Gérard & Verdier, Thierry, 1992. "Privatization in Eastern Europe: Irreversibility and Critical Mass Effects," CEPR Discussion Papers 612, C.E.P.R. Discussion Papers.
- Schmidt Klaus M. & Schnitzer Monika, 1993.
"Privatization and Management Incentives in the Transition Period in Eastern Europe,"
Journal of Comparative Economics,
Elsevier, vol. 17(2), pages 264-287, June.
- Schmidt,Klaus & Schnitzer,Monika, 1992. "Privatization and management incentives in the transition period in Eastern Europe," Discussion Paper Serie A 374, University of Bonn, Germany.
- Schmidt, Klaus M. & Schnitzer, Monika, 1993. "Privatization and Management Incentives in the Transition Period in Eastern Europe," Munich Reprints in Economics 3400, University of Munich, Department of Economics.
- Schmidt, K.M. & Schnitzer, M., 1992. "Privatization and Management Incentives in the Transition Period in Eastern Europe," Working papers 92-17, Massachusetts Institute of Technology (MIT), Department of Economics.
- Schmidt, Klaus M. & Schnitzer, Monika, 1993. "Privatization and Management Incentives in the Transition Period in Eastern Europe," Munich Reprints in Economics 3109, University of Munich, Department of Economics.
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