Citation

Discussion Paper Details

Please find the details for DP743 in an easy to copy and paste format below:

Full Details   |   Bibliographic Reference

Full Details

Title: Privatization, Risk-Taking, and the Communist Firm

Author(s): Dominique Demougin and Hans-Werner Sinn

Publication Date: January 1993

Keyword(s): Communist Firm, Eastern Europe, Privatization and Risk-taking

Programme Area(s): Applied Macroeconomics

Abstract: This paper studies alternative methods of privatizing a formerly communist firm in the presence of imperfect risk markets. The methods include cash sales, a give-away scheme, and a participation contract where the government retains a sleeping fractional ownership in the firm. It is shown that with competitive bidding, the participation contract dominates cash sales because it generates both more private restructuring investment and a higher expected present value of revenue for the government. Under weak conditions the participation contract will induce more investment than the giveaway scheme, and it may even share the cash sales' virtue of incentive compatibility.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=743

Bibliographic Reference

Demougin, D and Sinn, H. 1993. 'Privatization, Risk-Taking, and the Communist Firm'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=743