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Macroeconomic implications of voucher privatization in a model with incomplete information

  • Damien Besancenot
  • Radu Vranceanu

Voucher privatization implies a significant wealth transfer from state to private agents who, in turn, would increase consumption. This paper investigates the consequences of this wealth effect on the macroeconomic equilibrium in a high unemployment economy. The model builds on a two-stage sequential game between the government and private agents. We verify the existence of a pooling equilibrium in which private agents cannot guess whether a policy of fast privatization will be continued in the future or not. This configuration presents an endogenous probability of privatization slowdown; as a consequence, the wealth effect is moderated and the genuine fast privatizer government bears an “undue” credibility cost in terms of employment

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Article provided by Taylor & Francis Journals in its journal Journal of Economic Policy Reform.

Volume (Year): 4 (2000)
Issue (Month): 2 ()
Pages: 147-164

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Handle: RePEc:taf:jpolrf:v:4:y:2000:i:2:p:147-164
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