Privatization and Management Incentives in the Transition Period in Eastern Europe

Schmidt, Klaus M. and Schnitzer, Monika (June 1993): Privatization and Management Incentives in the Transition Period in Eastern Europe. In: Journal of Comparative Economics, Vol. 17, No. 2: pp. 264-287

Abstract

The paper develops a simple theoretical framework in which the impact of different governance structures on management incentives, the efficiency of restructuring, and the social costs of the adjustment process in the transition period in Eastern Europe can be analyzed. The model shows that immediate privatization leads not only to strong management incentives to restructure but also to high social costs of bankruptcies and layoffs. If the government stays in control social costs will be lower. However, in this case managers face a soft budget constraint and have less incentive to restructure. The model also suggests which companies should be privatized first. J. Comp. Econom., June 1993, 17(2), pp 964-287. University of Bonn, D-531 13 Bonn, Germany.

• Item Type: Journal article
• Faculties: Economics > Chairs > Seminar for Economic Theory; Economics; Economics > Chairs > Seminar for Comparative Economics
• Subjects: 300 Social sciences > 300 Social sciences, sociology and anthropology; 300 Social sciences > 330 Economics
• ISSN: 0147-5967
• Language: English