Does Sequencing of Privatization Matter in Reforming Planned Economies?

38 Pages Posted: 15 Feb 2006

See all articles by Aasim Husain

Aasim Husain

International Monetary Fund (IMF) - Research Department

Ratna Sahay

International Monetary Fund (IMF) - Developing Country Studies Division; National Bureau of Economic Research (NBER)

Date Written: February 1992

Abstract

Although a centerpiece of the reform process in Central and Eastern Europe, large-scale privatization cannot be undertaken all at once and policymakers inevitably face the choice of privatizing some sectors before others, This paper analyzes the allocative efficiency implications of alternate sequences of privatization in a reforming planned economy with two sectors--an input-producing upstream sector and a final goods-producing downstream sector. The model focuses on the link, through a market for intermediate inputs, between the two sectors. The impact of exogenous shocks to the two sectors are highlighted to show how the inflexibility of public firms in responding to shocks constrains the production response of private firms operating in perfectly as well as imperfectly competitive markets.

JEL Classification: P21, L10

Suggested Citation

Husain, Aasim and Sahay, Ratna, Does Sequencing of Privatization Matter in Reforming Planned Economies? (February 1992). IMF Working Paper No. 92/13, Available at SSRN: https://ssrn.com/abstract=884595

Aasim Husain (Contact Author)

International Monetary Fund (IMF) - Research Department ( email )

700 19th Street NW
Washington, DC 20431
United States

Ratna Sahay

International Monetary Fund (IMF) - Developing Country Studies Division ( email )

700 19th Street NW
Washington, DC 20431
United States
202-623-7181 (Phone)
202-623-7271 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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