Mass Privatisation and Partial State Ownership of Firms in Transition Economics

39 Pages Posted: 26 Sep 2001

See all articles by John Bennett

John Bennett

Brunel University London - Economics and Finance; Institute for the Study of Labor (IZA); University of Wales, Swansea - School of Business and Economics; Centre for Economic Policy Research (CEPR)

Saul Estrin

London School of Economics & Political Science (LSE); Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

James W. Maw

Swansea University - Department of Economics

Date Written: July 2001

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.

Keywords: Privatisation, state ownership, transition economies

JEL Classification: L33, P21

Suggested Citation

Bennett, John and Estrin, Saul and Maw, James W., Mass Privatisation and Partial State Ownership of Firms in Transition Economics (July 2001). CEPR Discussion Paper No. 2895. Available at SSRN: https://ssrn.com/abstract=285269

John Bennett (Contact Author)

Brunel University London - Economics and Finance ( email )

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Institute for the Study of Labor (IZA)

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University of Wales, Swansea - School of Business and Economics ( email )

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Centre for Economic Policy Research (CEPR)

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Saul Estrin

London School of Economics & Political Science (LSE) ( email )

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Centre for Economic Policy Research (CEPR)

London
United Kingdom

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

James W. Maw

Swansea University - Department of Economics ( email )

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Singleton Park Room 223
Swansea SA2 8PP
United Kingdom
+44 1792 295 168, ext. 40 (Phone)
+44 1792 295 716 (Fax)

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