Privatization and Deindustrialization in East Germany
The transition in East Germany has been characterized by an extremely rapid privatization of state-owned enterprises and by an equally rapid process of deindustrialization. The great majority of East German SOEs have been privatized and are now genuine capitalist firms with an owner with the incentive and the power to change management behaviour. Meanwhile East Germany has been deindustrialized with employment in mining and manufacturing falling to one quarter of its pre-unification level. This paper argues that the government imposed an inconsistent policy toward employment on the privatization agency, the Treuhand. Although required to take account of the shadow price of labour in the privatization negotiations (where employment subsidies were offered to prospective purchasers), the Treuhand engaged in large-scale labour shedding prior to privatization (using the market wage). Although costly from the perspective of the economy as a whole, the Treuhand had little choice given its mandate to privatize rapidly. Finding buyers for Treuhand enterprises has required single-minded focus on the issue of corporate governance and the matching of assets to management capabilities through the policy of selling to `competent outsiders' diverted attention from the possibility that such a policy would not guarantee the retention of a minimal core of industrial activity. Late in the day, the Treuhand recognized that greater use had to be made of economies of scale in management and control to achieve the forward-looking restructuring of its remaining portfolio. It was necessary to create new institutions.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
|Date of creation:||Dec 1993|
|Contact details of provider:|| Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.|
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
|Order Information:|| Email: |
When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:892. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.