The Political Economy of Mass Privatization and the Risk of Expropriation
نویسندگان
چکیده
The privatization process in Eastern Europe is not irreversible. Future governments may want to (partially) expropriate successul private rms in order to subsidize unsuccessful ones. We use a simple median voter model to predict the policy of future governments. It is shown that there will be less expropriation the more shares were distributed for free to the population. Diversi ed mass privatization is better than insider privatization. Furthermore, people should be discouraged to sell their shares for cash. Finally, we show that some free distribution of shares may induce more investment and increase expected pro ts and privatization revenues for the government. JEL classification numbers: D72, L33.
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