Privatization, Risk-Taking, and the Communist Firm
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 giveaway scheme, and it may even share the cash sales' virtue of incentive compatibility.
|Date of creation:||Nov 1992|
|Date of revision:|
|Publication status:||published as Journal of Public Economics, Vol. 55, no.2 pp. 203-231, October 1994|
|Contact details of provider:|| Postal: |
Web page: http://www.nber.org
More information through EDIRC
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.:
- 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.
- Meyer, Jack, 1987. "Two-moment Decision Models and Expected Utility Maximization," American Economic Review, American Economic Association, vol. 77(3), pages 421-30, June.
- Joseph E. Stiglitz, 1973.
"Incentives and Risk-Sharing in Sharecropping,"
Cowles Foundation Discussion Papers
353, Cowles Foundation for Research in Economics, Yale University.
- 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.
- Ahsan, Syed M, 1974. "Progression and Risk-Taking," Oxford Economic Papers, Oxford University Press, vol. 26(3), pages 318-28, November.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:4205. See general information about how to correct material in RePEc.
If references are entirely missing, you can add them using this form.