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Privatization, Market Liberalization, and Learning in Transition Economies

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  • Gordon C. Rausser
  • Leo K. Simon

Abstract

Privatization and market liberalization are widely considered to be complementary reforms in transition economies. This article challenges this view and the closely related “big bang” approach: when pursued too vigorously, privatization may impede the transition process following liberalization. Our result is based on an explicit model of market learning. Compared to a mature market, a market in transition is characterized by greater uncertainty regarding market conditions, including equilibrium prices and quantities. Economic actors must learn about these conditions through their participation in the market process. Less than full privatization is optimal if the costs of learning are sufficiently important. Copyright 1998, Oxford University Press.

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  • Gordon C. Rausser & Leo K. Simon, 1998. "Privatization, Market Liberalization, and Learning in Transition Economies," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 80(4), pages 724-737.
    • Handle: RePEc:oup:ajagec:v:80:y:1998:i:4:p:724-737
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    1. 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.
    2. Nauro F. Campos & Roman Horváth, 2006. "Reform Redux: Measurement, Determinants and Reversals," Working Papers IES 2006/16, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Apr 2006.
    3. Allen, James E., 2018. "Are agricultural markets more developed around cities? Testing for urban heterogeneity in separability in Tanzania," Food Policy, Elsevier, vol. 79(C), pages 199-212.
    4. Hans J. Czap & Kanybek D. Nur-tegin, 2011. "Big Bang vs. Gradualism – A Productivity Analysis," EuroEconomica, Danubius University of Galati, issue 29, pages 38-56, August.
    5. da Rocha, Bruno T., 2015. "Let the markets begin: The interplay between free prices and privatisation in early transition," Journal of Comparative Economics, Elsevier, vol. 43(2), pages 350-370.
    6. Koptchenov, Alexei A. & Ames, Glenn C.W., 1999. "The Russian Economic Crisis: Impact On Agriculture And Higher Education In The Chelyabinsk Oblast, Ural Region," Faculty Series 16727, University of Georgia, Department of Agricultural and Applied Economics.
    7. Xie, Feng & Anderson, Hamish D. & Chi, Jing & Liao, Jing, 2019. "Does residual state ownership increase stock return volatility? Evidence from China's secondary privatization," Journal of Banking & Finance, Elsevier, vol. 100(C), pages 234-251.
    8. Odhiambo, Mark O. & Oluoch-Kosura, Willis & Kibiego, Michael B., 2006. "Analysis of the Structure and Performance of the Beans Marketing System in Nairobi," 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia 25440, International Association of Agricultural Economists.

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