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On the Sequencing of Privatization in Transition Economies

Author

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  • Gautam Ahuja
  • Sumit K. Majumdar

Abstract

This paper presents an empirical criterion for establishing privatization priorities for state owned enterprises. The approach uses firm performance as the basis for deciding the sequence in which firms are privatized. Sequencing is relevant because the order in which a group of state enterprises are taken up for privatization has efficiency implications, and an appropriate sequence based on efficiency considerations can be beneficial. Privatizing inefficient enterprises before efficient ones is a superior sequence as compared to one which reverses this order, and the size of the firms to be privatized is an important contingency. An improvement index is constructed for individual firms, and the index makes possible a comparison of multiple firms, thus, facilitating the construction of a priority schedule. This approach is demonstrated using a sample of Indian service sector firms, and the approach can aid policy-makers in transition economies as they undertake the privatization of state-owned enterprises.

Suggested Citation

  • Gautam Ahuja & Sumit K. Majumdar, 1997. "On the Sequencing of Privatization in Transition Economies," William Davidson Institute Working Papers Series 65, William Davidson Institute at the University of Michigan.
    • Handle: RePEc:wdi:papers:1997-65
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    File URL: http://deepblue.lib.umich.edu/bitstream/2027.42/39455/3/wp65.pdf
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    Cited by:

    1. Laveesh Bhandari & Sudipto Dasgupta & Shubhashis Gangopadhyay, 2003. "Development Financial Institutions, Financial Constraints and Growth: Evidence from the Indian Corporate Sector," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 2(1), pages 83-121, January.
    2. Gianni De Fraja & Barbara M. Roberts, 2009. "Privatization in Poland What was the government trying to achieve?1," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 17(3), pages 531-557, July.
    3. Chang, Hsihui & Cheng, Mei-Ai & Das, Somnath, 2004. "Hospital ownership and operating efficiency: Evidence from Taiwan," European Journal of Operational Research, Elsevier, vol. 159(2), pages 513-527, December.

    More about this item

    JEL classification:

    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
    • P21 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Planning, Coordination, and Reform

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