Working Paper: CEPR ID: DP942
Authors: Gerard Roland
Abstract: This paper examines aspects of speed and sequencing of restructuring and privatization in economies in transition. It is argued that because of political constraints, restructuring is more likely to be gradual. Because of the political constraints on restructuring, a very fast and non-differentiated approach to privatization may lead to renationalization and general delays in restructuring. A more gradual policy of privatization may allow for the screening of good from bad firms, allow the emergence of a sound financial sector and give credibility to a policy of gradual restructuring and hardening of budget constraints in the state sector.
Keywords: Privatization; Restructuring; Political Constraints; Economic Transition
JEL Codes: No JEL codes provided
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| gradual approach to privatization (L33) | enhances bargaining power of good firms relative to the government (L10) |
| enhanced bargaining power of good firms relative to the government (L10) | reduces likelihood of government bailouts for bad firms (G33) |
| privatization (L33) | affects government's ability to tax good firms (H32) |
| privatization (L33) | hardening of budget constraints for SOEs (H60) |
| political constraints (D72) | delays in restructuring (G33) |
| speed of privatization (L33) | effectiveness of restructuring efforts (G34) |
| rapid privatization (L33) | partial renationalizations and delays in necessary restructuring (G33) |