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Title: Mass Privatisation and Partial State Ownership of Firms in Transition Economics

Author(s): John Bennett, Saul Estrin and James Maw

Publication Date: September 2001

Keyword(s): privatisation, state ownership and transition economies

Programme Area(s): Transition Economics

Abstract: In their privatization programs, transition governments have frequently given away shares (so-called `mass privatization'), while maintaining significant minority ownership. We explain the rationality of these policies for an expected net-revenue maximizing government. Our argument rests on a political feasibility constraint, preventing sale at a negative price. This constraint both raises prices that would otherwise be negative to zero, and has an indirect effect: mass privatization and partial retained state ownership may be chosen even if sale of a firm's entire assets would fetch a positive price. They are more likely to be chosen if the government has low bargaining power.

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Bibliographic Reference

Bennett, J, Estrin, S and Maw, J. 2001. 'Mass Privatisation and Partial State Ownership of Firms in Transition Economics'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=2895