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Political Objectives and Privatization Decisions - Selection of Firms into Privatization or Long-Term State Ownership in Romania

Author

Listed:
  • Adam Szentpeteri

    (Central European University of Budapest, Eotvos Lorand University)

  • Almos Telegdy

    (Institute of Economics - Hungarian Academy of Sciences)

Abstract

With the help of a peculiar institutional feature of early Romanian privatization, when a group of firms was explicitly banned to become private, we test which factors contributed to the selection of firms into long-term state ownership. We find that politicians sheltered large and inefficient firms from privatization, which paid low wages and had high overdue payments. These results are consistent with minimization of employment losses, even if efficiency enhancement of privatization or revenue maximization had to be sacrificed. We hypothesize that this behavior was induced by the unfavorable economic conditions in Romania which brought about large employment losses during the first several years of economic transition.

Suggested Citation

  • Adam Szentpeteri & Almos Telegdy, 2009. "Political Objectives and Privatization Decisions - Selection of Firms into Privatization or Long-Term State Ownership in Romania," CERS-IE WORKING PAPERS 0926, Institute of Economics, Centre for Economic and Regional Studies.
    • Handle: RePEc:has:discpr:0926
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    References listed on IDEAS

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    More about this item

    Keywords

    privatization; government objectives; Romania;
    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
    • P26 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Property Rights

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