Working Paper: CEPR ID: DP1058
Authors: Philippe Aghion; Olivier Jean Blanchard; Wendy Carlin
Abstract: This paper begins from the twin observation that on the one hand, privatization which leaves control in the hands of the insiders has produced little restructuring while on the other, state-owned enterprises have engaged in some restructuring even in the absence of a clear prospect of privatization. It situates enterprise restructuring at the heart of the process of transition of the state-owned enterprise sector. A set of theoretical tools is assembled which permits the analysis of the speed and depth of restructuring, and clarifies the roles of managers, employees, the state, and banks in bringing it about. A mapping is provided between the theoretical predications and a large body of anecdotal evidence on enterprise behaviour in the Central and East European economies.
Keywords: privatization; restructuring; bank recapitalization; transition; eastern europe; managerial incentives; unemployment
JEL Codes: P50
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| hardening of the budget constraint for state-owned enterprises (SOEs) (L32) | increases the cost of maintaining the status quo (D61) |
| increased budget constraints (H60) | higher likelihood of restructuring efforts (G33) |
| lack of career mobility (J62) | constrains managerial actions (D20) |
| employee opposition to restructuring (G34) | impedes managerial efforts (M54) |
| state involvement (H10) | mitigates the resistance from employees (M54) |