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The interaction between: (i) political constraints, in part based on notions of “nation building,” and independence; (ii) the development of a suitable legal and regulatory environment; and (iii) economic constraints such as a growing state budget deficit and a recent banking crisis, are the subject of this paper. The paper will review and discuss the main political economy and competition issu...

We test the hypothesis whether gradual privatization with a soft credit constraint to enterprises with state ownership (ESOs) implies slow restructuring. The transition economics literature does not study restructuring and financial constraints to investment jointly. We provide such an analysis using a panel of Latvian firms in the years 1993-1997. We find that firms have been downsizing their ...