IDEAS home Printed from https://ideas.repec.org/p/cre/uqamwp/9216.html
   My bibliography  Save this paper

Privatization, Risk-Taking and the Communist Firm

Author

Listed:

Abstract

This paper studies alternative methods of privatizing a formerly communist firm in the presence of imperfect risk markets. The methods include cash sales, a give-away scheme, and a participation contract where the government retains a sleeping fractional ownership in the firm. It is shown that, with competitive bidding, the participation contract dominates cash sales because it generates both more private restructuring investment and a higher expected present value of revenue for the government. Under weak conditions, the participation contract will induce more investment than the give-away scheme, and it may even share the cash sales’ virtue of incentive compatibility.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Dominique Demougin & Hans-Werner Sinn, 1992. "Privatization, Risk-Taking and the Communist Firm," Cahiers de recherche du Département des sciences économiques, UQAM 9216, Université du Québec à Montréal, Département des sciences économiques.
  • Handle: RePEc:cre:uqamwp:9216
    Note: To receive copy, email author
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Joseph E. Stiglitz, 1974. "Incentives and Risk Sharing in Sharecropping," Review of Economic Studies, Oxford University Press, vol. 41(2), pages 219-255.
    2. Ahsan, Syed M, 1974. "Progression and Risk-Taking," Oxford Economic Papers, Oxford University Press, vol. 26(3), pages 318-328, November.
    3. Meyer, Jack, 1987. "Two-moment Decision Models and Expected Utility Maximization," American Economic Review, American Economic Association, vol. 77(3), pages 421-430, June.
    4. Steven Shavell, 1979. "Risk Sharing and Incentives in the Principal and Agent Relationship," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 55-73, Spring.
    5. Bulow, Jeremy I & Summers, Lawrence H, 1984. "The Taxation of Risky Assets," Journal of Political Economy, University of Chicago Press, vol. 92(1), pages 20-39, February.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. repec:oup:ecpoli:v:12:y:1997:i:24:p:177-210 is not listed on IDEAS
    2. Walsh, Patrick Paul & Whelan, Ciara, 2001. "Firm performance and the political economy of corporate governance: survey evidence for Bulgaria, Hungary, Slovakia and Slovenia," Economic Systems, Elsevier, vol. 25(2), pages 85-112, June.
    3. Hans-Werner Sinn & Alfons J. Weichenrieder & Alfons Weichenrieder, 1997. "Foreign Direct Investment, Political Resentment and the Privatization Process in Eastern Europe," CESifo Working Paper Series 129, CESifo.
    4. Hans-Werner Sinn & Alfons J. Weichenrieder, 1997. "Foreign direct investment, political resentment and the privatization process in eastern Europe," Economic Policy, CEPR;CES;MSH, vol. 12(24), pages 177-210, April.
    5. Bennett, John & Maw, James, 2000. "Privatisation and market structure in a transition economy," Journal of Public Economics, Elsevier, vol. 77(3), pages 357-382, September.
    6. Bennett, John & Maw, James, 2003. "Privatization, partial state ownership, and competition," Journal of Comparative Economics, Elsevier, vol. 31(1), pages 58-74, March.
    7. Bodó, Péter, 1996. "Az ügynökprobléma néhány aspektusa az átmeneti gazdaságban [Some aspects of the agent problem in the transition economy]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(4), pages 342-349.
    8. Bennett, John & Estrin, Saul & Maw, James, 2007. "The choice of privatization method in a transition economy when insiders control a firm," European Journal of Political Economy, Elsevier, vol. 23(3), pages 806-819, September.
    9. Pennings, Enrico, 2008. "Privatization of real options," Journal of Comparative Economics, Elsevier, vol. 36(3), pages 489-497, September.
    10. Maw, James, 2002. "Partial privatization in transition economies," Economic Systems, Elsevier, vol. 26(3), pages 271-282, September.
    11. Banerji, Sanjay & Errunza, Vihang R., 2005. "Privatization under incomplete information and bankruptcy risk," Journal of Banking & Finance, Elsevier, vol. 29(3), pages 735-757, March.
    12. Chen, Chien-Hsun & Mai, Chao-Cheng & Liu, Yu-Lin & Mai, Shin-Ying, 2009. "Privatization and optimal share release in the Chinese banking industry," Economic Modelling, Elsevier, vol. 26(6), pages 1161-1171, November.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Konrad, Kai A., 1989. "Kapitaleinkommensteuern und beschleunigte Abschreibungen bei Unsicherheit," EconStor Open Access Articles, ZBW - Leibniz Information Centre for Economics, pages 404-427.
    2. Roussey, Ludivine & Soubeyran, Raphael, 2018. "Overburdened judges," International Review of Law and Economics, Elsevier, vol. 55(C), pages 21-32.
    3. Ines Macho-Stadler & David Pérez-Castrillo, 2016. "Moral Hazard: Base Models and Two Extensions," CESifo Working Paper Series 5851, CESifo.
    4. Jean-Jacques Laffont, 1987. "Le risque moral dans la relation de mandat," Revue Économique, Programme National Persée, vol. 38(1), pages 5-24.
    5. Syed M. Ahsan & Panagiotis Tsigaris, 2008. "The Efficiency Loss of Capital Income Taxation under Imperfect Loss Offset Provisions," CESifo Working Paper Series 2203, CESifo.
    6. Segerson, Kathleen, 1988. "Uncertainty and incentives for nonpoint pollution control," Journal of Environmental Economics and Management, Elsevier, vol. 15(1), pages 87-98, March.
    7. Ng, Yew-Kwang & Shi, He-ling, 1995. "Work quality and optimal pay structure: Piece vs. hourly rates in employee remuneration," Economics Letters, Elsevier, vol. 47(3-4), pages 409-416, March.
    8. Gaarder, Marie M. & Bartsch, Ulrich, 2014. "The second wave of independence : shopping for solutions," Policy Research Working Paper Series 7069, The World Bank.
    9. Inés Macho-Stadler & David Pérez-Castrillo, 2018. "Moral hazard: Base models and two extensions," Chapters, in: Luis C. Corchón & Marco A. Marini (ed.), Handbook of Game Theory and Industrial Organization, Volume I, chapter 16, pages 453-485, Edward Elgar Publishing.
    10. Niemann, Rainer, 2007. "Risikoübernahme, Arbeitsanreiz und differenzierende Besteuerung," arqus Discussion Papers in Quantitative Tax Research 28, arqus - Arbeitskreis Quantitative Steuerlehre.
    11. repec:eee:labchp:v:2:y:1986:i:c:p:789-848 is not listed on IDEAS
    12. Kim, Son Ku & Wang, Susheng, 1998. "Linear Contracts and the Double Moral-Hazard," Journal of Economic Theory, Elsevier, vol. 82(2), pages 342-378, October.
    13. Sokolovskyi, Dmytro, 2017. "Gaming modeling of self-enforcing agreements and free-rider problem," MPRA Paper 80818, University Library of Munich, Germany.
    14. Aggarwal, Rimjhim M., 2007. "Role of risk sharing and transaction costs in contract choice: Theory and evidence from groundwater contracts," Journal of Economic Behavior & Organization, Elsevier, vol. 63(3), pages 475-496, July.
    15. Konrad, Kai A., 1991. "The Domar-Musgrave phenomenon and adverse selection," European Journal of Political Economy, Elsevier, vol. 7(1), pages 41-53, April.
    16. Hlouskova, Jaroslava & Tsigaris, Panagiotis, 2020. "Capital income taxation under full loss offset provisions of a prospect theory investor," IHS Working Paper Series 11, Institute for Advanced Studies.
    17. Fernandez-Olmos, Marta & Rosell-Martinez, Jorge & Espitia-Escuer, Manuel Antonio, 2008. "Double Sided Moral Hazard and Share Contracts in agriculture," 2008 International Congress, August 26-29, 2008, Ghent, Belgium 43863, European Association of Agricultural Economists.
    18. Sokolovskyi Dmytro B., 2013. "Modelling "Horizontal" Interaction of Economic Agents with the Help of a Collection of Games," Business Inform, RESEARCH CENTRE FOR INDUSTRIAL DEVELOPMENT PROBLEMS of NAS (KHARKIV, UKRAINE), Kharkiv National University of Economics, issue 9, pages 90-94.
    19. Graff Zivin, Joshua & Small, Arthur A., 2003. "Risk sharing in Coasean contracts," Journal of Environmental Economics and Management, Elsevier, vol. 45(2, Supple), pages 394-415, March.
    20. Barry, Peter J. & Escalante, Cesar L. & Moss, Leeann E., 2002. "Rental Premiums For Share Versus Cash Leases," 2002 Annual meeting, July 28-31, Long Beach, CA 19684, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    21. Michael Devereux, 2003. "Measuring taxes on income from capital," IFS Working Papers W03/04, Institute for Fiscal Studies.

    More about this item

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • P13 - Economic Systems - - Capitalist Systems - - - Cooperative Enterprises

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cre:uqamwp:9216. 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: (Stéphane Pallage). General contact details of provider: http://edirc.repec.org/data/duqamca.html .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.