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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.

Suggested Citation

  • van Wijnbergen, Sweder, 1992. "Enterprise Reform in Eastern Europe," CEPR Discussion Papers 738, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:738
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    References listed on IDEAS

    as
    1. Philippe Aghion & Oliver D. Hart & John Moore, 1994. "The Economics of Bankruptcy Reform," NBER Chapters,in: The Transition in Eastern Europe, Volume 2: Restructuring, pages 215-244 National Bureau of Economic Research, Inc.
    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.
    3. Graham Bird (ed.), 1992. "Economic Reform in Eastern Europe," Books, Edward Elgar Publishing, number 44.
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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., 1993. "An institutional approach to banking reform in Eastern Europe," Kiel Working Papers 560, Kiel Institute for the World Economy (IfW).

    More about this item

    Keywords

    Bank Reform; Eastern Europe; Enterprise Restructuring;

    JEL classification:

    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior

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