Foreign direct investment, political resentment and the privatization process in eastern Europe
Foreign direct investment has been disappointingly low in eastern Europe, which has been reluctant to make existing assets available to foreign investors. To mitigate any such resentment, we propose a participation model in which foreign investors compete for joint venture contracts. Host governments contribute existing assets and receive non-voting stocks. Foreign investors, contributing capital and know-how, receive voting shares and control of operational decisions. This has several advantages over the cash sale of assets to foreigners. First, stock flow problems are eased, raising both asset prices and FDI flows. Second, by retaining some stake in the firm, transition countries share in the risk premium. Third, governments can hand over their shares to households, creating private collateral to foster new small businesses. Fourth, and crucially, compared to cash sales the auction of participation contracts offers higher privatization revenues in cases where governments cannot assess investors’ knowledge and abilities. This reduces the risk of selling the family silver too cheaply, and should alleviate the host countries’ resentment.
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" 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.
|Date of creation:||1997|
|Publication status:||Published in Economic Policy 24 12(1997): pp. 177-210|
|Contact details of provider:|| Postal: Ludwigstr. 28, 80539 Munich, Germany|
Web page: http://www.vwl.uni-muenchen.de
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Bond, E.W. & Samuelson, L., 1988.
"Strategic Behavior And The Rules For International Taxation Of Capital,"
3-88-10, Pennsylvania State - Department of Economics.
- Bond, Eric W & Samuelson, Larry, 1989. "Strategic Behaviour and the Rules for International Taxation of Capital," Economic Journal, Royal Economic Society, vol. 99(398), pages 1099-1111, December.
- Hans-Werner Sinn, 1995. "Staggering along: wages policy and investment support in East Germany," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 3(4), pages 403-426, December.
- Demougin, Dominique & Sinn, Hans-Werner, 1994.
"Privatization, risk-taking, and the communist firm,"
Munich Reprints in Economics
20039, University of Munich, Department of Economics.
- Demougin, Dominique & Sinn, Hans-Werner, 1994. "Privatization, risk-taking, and the communist firm," Journal of Public Economics, Elsevier, vol. 55(2), pages 203-231, October.
- Demougin, Dominique & Sinn, Hans-Werner, 1993. "Privatization, Risk-Taking, and the Communist Firm," CEPR Discussion Papers 743, C.E.P.R. Discussion Papers.
- 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.
- Dominique Demougin & Hans-Werner Sinn, 1992. "Privatization, Risk-Taking, and the Communist Firm," NBER Working Papers 4205, National Bureau of Economic Research, Inc.
- Wolfstetter, Elmar, 1996.
" Auctions: An Introduction,"
Journal of Economic Surveys,
Wiley Blackwell, vol. 10(4), pages 367-420, December.
- Jonathan Eaton & Mark Gersovitz, 1982.
"A Theory of Expropriation and Deviations From Perfect Capital Mobility,"
NBER Working Papers
0972, National Bureau of Economic Research, Inc.
- Eaton, Jonathan & Gersovitz, Mark, 1984. "A Theory of Expropriation and Deviations from Perfect Capital Mobility," Economic Journal, Royal Economic Society, vol. 94(373), pages 16-40, March.
- R. Preston McAfee & John McMillan, 1986. "Bidding for Contracts: A Principal-Agent Analysis," RAND Journal of Economics, The RAND Corporation, vol. 17(3), pages 326-338, Autumn.
- Maxim Boycko & Andrei Shlelfer & Robert Vishny, 1993.
University of Chicago - George G. Stigler Center for Study of Economy and State
85, Chicago - Center for Study of Economy and State.
- Hansen, Robert G, 1985. "Auctions with Contingent Payments," American Economic Review, American Economic Association, vol. 75(4), pages 862-865, September.
- Weichenrieder, Alfons J, 1996. " Transfer Pricing, Double Taxation, and the Cost of Capital," Scandinavian Journal of Economics, Wiley Blackwell, vol. 98(3), pages 445-452.
- John G. Riley, 1988. "Ex Post Information in Auctions," Review of Economic Studies, Oxford University Press, vol. 55(3), pages 409-429.
- Samuelson, William, 1987. "Auctions with Contingent Payments: Comment," American Economic Review, American Economic Association, vol. 77(4), pages 740-745, September.
- Cremer, Jacques, 1987. "Auctions with Contingent Payments: Comment," American Economic Review, American Economic Association, vol. 77(4), pages 746-746, September.
When requesting a correction, please mention this item's handle: RePEc:lmu:muenar:19562. 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: (Tamilla Benkelberg)
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.