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Political Objectives and Privatization Decisions - Selection of Firms into Privatization or Long-Term State Ownership in Romania


  • Adam Szentpeteri

    () (Central European University of Budapest, Eotvos Lorand University)

  • Almos Telegdy

    () (Institute of Economics - Hungarian Academy of Sciences)


With the help of a peculiar institutional feature of early Romanian privatization, when a group of firms was explicitly banned to become private, we test which factors contributed to the selection of firms into long-term state ownership. We find that politicians sheltered large and inefficient firms from privatization, which paid low wages and had high overdue payments. These results are consistent with minimization of employment losses, even if efficiency enhancement of privatization or revenue maximization had to be sacrificed. We hypothesize that this behavior was induced by the unfavorable economic conditions in Romania which brought about large employment losses during the first several years of economic transition.

Suggested Citation

  • Adam Szentpeteri & Almos Telegdy, 2009. "Political Objectives and Privatization Decisions - Selection of Firms into Privatization or Long-Term State Ownership in Romania," IEHAS Discussion Papers 0926, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
  • Handle: RePEc:has:discpr:0926

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    References listed on IDEAS

    1. Florencio Lopez-de-Silanes & Andrei Shleifer & Robert Vishny, 1997. "Privatization in the United States," RAND Journal of Economics, The RAND Corporation, vol. 28(3), pages 447-471, Autumn.
    2. J. David Brown & John S. Earle & Almos Telegdy, 2006. "The Productivity Effects of Privatization: Longitudinal Estimates from Hungary, Romania, Russia, and Ukraine," Journal of Political Economy, University of Chicago Press, vol. 114(1), pages 61-99, February.
    3. Simeon Djankov & Peter Murrell, 2002. "Enterprise Restructuring in Transition: A Quantitative Survey," Journal of Economic Literature, American Economic Association, vol. 40(3), pages 739-792, September.
    4. Earle, John S. & Telegdy, Almos, 2002. "Privatization Methods and Productivity Effects in Romanian Industrial Enterprises," Journal of Comparative Economics, Elsevier, vol. 30(4), pages 657-682, December.
    5. Saul Estrin & Jan Hanousek & Evzen Kocenda & Jan Svejnar, 2009. "The Effects of Privatization and Ownership in Transition Economies," Journal of Economic Literature, American Economic Association, vol. 47(3), pages 699-728, September.
    6. Megginson, William Leon, 2005. "The Financial Economics of Privatization," OUP Catalogue, Oxford University Press, number 9780195150629, June.
    7. Gupta, Nandini & Ham, Jhon C. & Svejnar, Jan, 2008. "Priorities and sequencing in privatization: Evidence from Czech firm panel data," European Economic Review, Elsevier, vol. 52(2), pages 183-208, February.
    8. Kay, J A & Thompson, D J, 1986. "Privatisation: A Policy in Search of a Rationale," Economic Journal, Royal Economic Society, vol. 96(381), pages 18-32, March.
    9. Kai Guo & Yang Yao, 2005. "Causes of privatization in China," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 13(2), pages 211-238, April.
    10. J. David Brown & John S. Earle & Almos Telegdy, "undated". "The Productivity Effects of Privatization: Longitudnal Estimates for Hungary, romania, Russia, and Ukraine," Upjohn Working Papers and Journal Articles jse20063, W.E. Upjohn Institute for Employment Research.
    11. Gianni De Fraja & Barbara M. Roberts, 2009. "Privatization in Poland," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 17(3), pages 531-557, July.
    12. repec:hrv:faseco:30727606 is not listed on IDEAS
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    More about this item


    privatization; government objectives; Romania;

    JEL classification:

    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
    • P26 - Economic Systems - - Socialist Systems and Transition Economies - - - Political Economy

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