Working Paper: CEPR ID: DP5215
Authors: Nauro F. Campos; Francesco Giovannoni
Abstract: During the transition from plan to market, managers and politicians succeeded in maintaining control of large parts of the stock of socialist physical capital. Despite the obvious importance of this phenomenon, there have been no efforts to model, measure and investigate this process empirically. This paper tries to fill this gap by putting forward theory and econometric evidence. We argue that asset stripping is driven by the interplay between the firm's potential profitability and its ability to influence law enforcement. Our econometric results, for about 950 firms in five transition economies, provide support for this argument.
Keywords: asset stripping; corruption; law enforcement; transition
JEL Codes: H82; K42; O17; P26; P31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Larger firms (L25) | Asset stripping (G33) |
| Intermediate profitability (L21) | Asset stripping (G33) |
| Access to startup financing from state-owned enterprises (O16) | Asset stripping (G33) |
| Protection payments (H55) | Asset stripping (G33) |