Working Paper: CEPR ID: DP6114
Authors: Gianni De Fraja; Barbara M. Roberts
Abstract: This paper uses the sequencing of privatisation to infer the objective pursued by the Polish government in the privatisation of its large manufacturing firms in the second half of the 1990's. We construct a model of mixed oligopoly, and use it to evaluate the privatisation process; our analysis is based on the assumption that firms which furthered the government's objective function the most would be chosen to be privatised first. Our empirical analysis identifies the features of the firms that were chosen for early privatisation, and suggests that the welfare maximisation was more important than the desire to maximise the revenues from privatisation and the government's budget, or to minimise employment losses.
Keywords: Eastern Europe; Mixed Oligopoly; Poland; Privatisation
JEL Codes: D63; I28
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Government prioritises privatisation of firms that enhance welfare maximisation (L33) | Characteristics of firms chosen for early privatisation (P31) |
| Characteristics of firms chosen for early privatisation align closely with welfare-enhancing attributes (L33) | Privatisation outcomes (L33) |
| Sequencing of privatisation was strategic (L33) | Earlier privatisations yield stronger positive effects on government objective function (L33) |
| Firms in industries with a higher proportion of foreign firms were privatised sooner (L33) | Focus on enhancing competitiveness and consumer welfare (L49) |
| Privatisation of larger firms occurred earlier than smaller firms (L33) | Government aimed to maximise welfare (D69) |