PRIVATIZATION, RISK-TAKING, AND THE COMMUNIST FIRM

DEMOUGIN, D ORCID: 0000-0002-1744-0390 and SINN, HW (1994) PRIVATIZATION, RISK-TAKING, AND THE COMMUNIST FIRM. JOURNAL OF PUBLIC ECONOMICS, 55 (2). pp. 203-231.

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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 give-away scheme, and it may even share the cash sales' virtue of incentive compatibility. © 1994.

Item Type:	Article
Uncontrolled Keywords:	PRIVATIZATION, RISK THEORY, ECONOMIC TRANSFORMATION
Depositing User:	Symplectic Admin
Date Deposited:	22 Aug 2016 10:38
Last Modified:	19 Jan 2023 07:32
DOI:	10.1016/0047-2727(94)90052-3
Related URLs:	Author Publisher
URI:	https://livrepository.liverpool.ac.uk/id/eprint/3002942