Mass Privatization and Partial State Ownership of Forms in Transition Economies
Posted: 8 Feb 2001
Date Written: November 2000
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 this behavior for an expected net-revenue maximizing government. Our argument rests on a political feasibility constraint, preventing sale at a negative price. The constraint raises to zero prices that would otherwise be negative, 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.
Keywords: privatization, state ownership, transition economics
JEL Classification: L33, P21
Suggested Citation: Suggested Citation