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Large-Scale Privatization in Transition Economies

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  • Laban, Raul
  • Wolf, Holger C

Abstract

To explain the slow progress of mass privatization programs in Eastern Europe, the authors present a model based on a positive spillover between aggregate privatization and the individual expected return to privatization, derived from a potential populist backlash if costly reforms do not bring forth sufficient aggregate privatization. The model allows for the simultaneous existence of a pessimistic zero-privatization trap and an optimistic full-privatization equilibrium defined by a critical mass of expected privatization. While both privatization subsidies and minimum-income guarantees can by themselves secure coordination on the optimistic equilibrium, the financing constraint may offset the direct effect. Copyright 1993 by American Economic Association.

Suggested Citation

  • Laban, Raul & Wolf, Holger C, 1993. "Large-Scale Privatization in Transition Economies," American Economic Review, American Economic Association, vol. 83(5), pages 1199-1210, December.
    • Handle: RePEc:aea:aecrev:v:83:y:1993:i:5:p:1199-1210
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    Cited by:

    1. Huizinga, Harry & Nielsen, Soren Bo, 2001. "Privatization, public investment, and capital income taxation," Journal of Public Economics, Elsevier, vol. 82(3), pages 399-414, December.
    2. Alexeev, Michael & Kaganovich, Michael, 1995. "Distributional constraints on the speed of privatization," Economics Letters, Elsevier, vol. 48(2), pages 213-219, May.
    3. Goel, Rajeev K. & Budak, Jelena, 2006. "Privatization in transition economies: Privatization scale and country size," Economic Systems, Elsevier, vol. 30(1), pages 98-110, March.
    4. Cheikbossian, Guillaume, 2003. "Property rights, rent-seeking and aggregate outcomes in transition economies," Economic Systems, Elsevier, vol. 27(3), pages 271-288, September.
    5. Laban, Raul M. & Larrain, Felipe B., 1997. "Can a liberalization of capital outflows increase net capital inflows?," Journal of International Money and Finance, Elsevier, vol. 16(3), pages 415-431, June.
    6. Schmidt, Klaus M., 2000. "The political economy of mass privatization and the risk of expropriation," European Economic Review, Elsevier, vol. 44(2), pages 393-421, February.
    7. Johnson, Simon & Kouvelis, Panos & Sinha, Vikas, 1997. "On Reform Intensity under Uncertainty," Journal of Comparative Economics, Elsevier, vol. 25(3), pages 297-321, December.
    8. Anders Åslund & Peter Boone & Simon Johnson, 1996. "How to Stabilize: Lessons from Post-communist Countries," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(1), pages 217-314.
    9. Ibolya Schindele, 2003. "Theory of Privatization in Eastern Europe: Literature Review," Working Papers 2003.2, Fondazione Eni Enrico Mattei.
    10. Chen, Gongmeng & Firth, Michael & Rui, Oliver, 2006. "Have China's enterprise reforms led to improved efficiency and profitability?," Emerging Markets Review, Elsevier, vol. 7(1), pages 82-109, March.
    11. Hanan G. Jacoby & Guo Li & Scott Rozelle, 2002. "Hazards of Expropriation: Tenure Insecurity and Investment in Rural China," American Economic Review, American Economic Association, vol. 92(5), pages 1420-1447, December.
    12. Katz, Barbara G. & Owen, Joel, 1997. "Optimal Voucher Privatization Fund Bids When Bidding Affects Firm Performance," Journal of Comparative Economics, Elsevier, vol. 24(1), pages 25-43, February.
    13. Raul Laban & FElipe Larrain, 1995. "Continuity, Change, and the Political Economy of Transition in Chile," NBER Chapters, in: Reform, Recovery, and Growth: Latin America and the Middle East, pages 115-148, National Bureau of Economic Research, Inc.
    14. Janeba, Eckhard, 2004. "Global corporations and local politics: income redistribution vs. FDI subsidies," Journal of Development Economics, Elsevier, vol. 74(2), pages 367-391, August.
    15. Jaime Andrés Collazos & Héctor Ochoa, 2005. "The Effects of a Monopolistic Market Structure on the Assessment of Privatized Companies: The Colombia Case," Ensayos Sobre Economía Regional (ESER) 13869, Banco de la República - Economía Regional.
    16. Litwack, John M. & Qian, Yingyi, 1998. "Balanced or Unbalanced Development: Special Economic Zones as Catalysts for Transition," Journal of Comparative Economics, Elsevier, vol. 26(1), pages 117-141, March.
    17. Hansen, Nico A., 1997. "Privatization, technology choice and aggregate outcomes," Journal of Public Economics, Elsevier, vol. 64(3), pages 425-442, June.
    18. John Litwack & Yingyi Qian, "undated". "Balanced or Unbalanced Development: Special Economic Zones as Catalysts for Transition," Working Papers 97044, Stanford University, Department of Economics.
    19. Eckhard Janeba, 2001. "Global Corporations and Local Politics: A Theory of Voter Backlash," NBER Working Papers 8254, National Bureau of Economic Research, Inc.
    20. Fluck, Zsuzsanna & John, Kose & Abraham Ravid, S., 1996. "Privatizing in stages and the dynamics of ownership structure," Pacific-Basin Finance Journal, Elsevier, vol. 4(2-3), pages 277-296, July.

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