The goal of our paper is to study the internal consistency of the privatisation policy in transitional economies. Private sector development not only fosters growth but also brings a fall in labor hoarding and an increase in unemployment. Governments must arbitrate between these two conflicting objectives, by means of selecting an appropriate privatisation policy. By assumption, privatisation may be either rapid or gradual. It is shown that in a dynamic framework, with individuals forming rational expectations, an employment-oriented government may however pursue a rapid privatisation policy, at least during an initial period of time. This allows expectations to be manipulated, in order to achieve higher employment in the future. At that stage, seemingly contradicting the former policy, such a government will slow down the privatisation speed. Our model provides an explanation for the experience with privatisation in many Eastern European countries, where, after an introductory wave of much publicised sales, the process of privatising the bulk of industrial enterprises has been halted.
BESANCENOT, D. and VRANCEANU, R. (1995). Cohérence temporelle et politique de privatisation dans les économies en transition. In: Colloque International d'Economie Publique. ENST de Bretagne, Département d'Economie, pp. 1-26.