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Mass Privatisation and Partial State Ownership of Firms in Transition Economics

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  • Bennett, John
  • Estrin, Saul
  • Maw, James

Abstract

In their privatization programs, transition governments have frequently given away shares (so-called `mass privatization'), while maintaining significant minority ownership. We explain the rationality of these policies for an expected net-revenue maximizing government. Our argument rests on a political feasibility constraint, preventing sale at a negative price. This constraint both raises prices that would otherwise be negative to zero, and has an indirect effect: mass privatization and partial retained state ownership may be chosen even if sale of a firm's entire assets would fetch a positive price. They are more likely to be chosen if the government has low bargaining power.

Suggested Citation

  • Bennett, John & Estrin, Saul & Maw, James, 2001. "Mass Privatisation and Partial State Ownership of Firms in Transition Economics," CEPR Discussion Papers 2895, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:2895
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    Citations

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    Cited by:

    1. Estrin, Saul & Bennett, John & Maw, James & Urga, Giovanni, 2004. "Privatization Methods and Economic Growth in Transition Economies," CEPR Discussion Papers 4291, C.E.P.R. Discussion Papers.
    2. Bhaumik, Sumon Kumar & Estrin, Saul, 2007. "How transition paths differ: Enterprise performance in Russia and China," Journal of Development Economics, Elsevier, vol. 82(2), pages 374-392, March.
    3. Estrin, Saul & Tian, Lihui, 2005. "Retained State Shareholding in Chinese PLCs: Does Government Ownership Reduce Corporate Value?," CEPR Discussion Papers 4919, C.E.P.R. Discussion Papers.
    4. Sumon Bhaumik & Saul Estrin, 2003. "Why Transition Paths Differ: Russian and Chinese Enterprise Performance Compared," William Davidson Institute Working Papers Series 525, William Davidson Institute at the University of Michigan.
    5. Maw, James, 2002. "Partial privatization in transition economies," Economic Systems, Elsevier, vol. 26(3), pages 271-282, September.
    6. Saul Estrin, 2002. "Competition and Corporate Governance in Transition," Journal of Economic Perspectives, American Economic Association, vol. 16(1), pages 101-124, Winter.
    7. Saul Estrin, 2001. "Competition and Corporate Governance in Transition," William Davidson Institute Working Papers Series 431, William Davidson Institute at the University of Michigan.
    8. Bennett, John & Maw, James, 2003. "Privatization, partial state ownership, and competition," Journal of Comparative Economics, Elsevier, vol. 31(1), pages 58-74, March.

    More about this item

    Keywords

    Privatisation; Transition economies; State ownership;
    All these keywords.

    JEL classification:

    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
    • P21 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Planning, Coordination, and Reform

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