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Fuelling political fiscal cycles by opportunistic privatization in transition economies: The case of Albania

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  • Lami, Endrit
  • Imami, Drini
  • Kächelein, Holger

Abstract

This paper provides insight into the widely studied phenomenon of political business cycles by analyzing the impact of elections on the privatization of public assets in transition economies. The hypothesis of this article is that incumbents opportunistically schedule privatizations to take place close to the next elections in order to finance higher public expenditures, aiming to please voters and increase the chances of being re-elected, particularly when their ability to borrow is constrained by high public debt. We consider the case of Albania, which is a transition and small open economy with a relatively high public debt. We find significant increases of income from privatization before elections. Despite often being trumpeted in the context of structural reforms, the intentional privatization of public assets in times of election is most likely a sub-optimal choice for the public interest. Studying the impact of elections on the privatization of public assets could be of interest to other transition economies facing fiscal constraints.

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  • Lami, Endrit & Imami, Drini & Kächelein, Holger, 2016. "Fuelling political fiscal cycles by opportunistic privatization in transition economies: The case of Albania," Economic Systems, Elsevier, vol. 40(2), pages 220-231.
    • Handle: RePEc:eee:ecosys:v:40:y:2016:i:2:p:220-231
    DOI: 10.1016/j.ecosys.2015.10.001
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    Cited by:

    1. Imami, Drini & Lami, Endrit & Pojani, Dorina, 2022. "Informal construction as political currency: A theory of ‘election-driven informality’," Land Use Policy, Elsevier, vol. 112(C).
    2. Lami, Endrit & Imami, Drini & Pugh, Geoffrey & Hashi, Iraj, 2021. "Fiscal performance and elections in the context of a transition economy," Economic Systems, Elsevier, vol. 45(2).
    3. Ivanović, Vladan & Uberti, Luca J. & Imami, Drini, 2023. "Opportunistic privatization," European Journal of Political Economy, Elsevier, vol. 80(C).
    4. Endrit Lami, 2023. "Political Budget Cycles in the Context of a Transition Economy: The Case of Albania," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 65(2), pages 221-262, June.

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    More about this item

    Keywords

    Privatization; Political business cycles; Elections; Albania;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • O23 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development
    • H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems

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