Privatization under Political Interference: Evidence from Eastern Germany
European Economic Review, Vol. 42 (1998), 1177-1201.

Abstract
Additional Files
Abstract

Can privatization authority be successfully delegated to a privatization agency? To address this question we examine the liquidation policy of the German privatization agency. The theoretical part develops a dynamic model of optimal liquidation under incomplete political insulation of the privatization agency. We explore how external political interference affects its liquidation policy and derive testable implications for the distribution of liquidation decisions and privatization prices. The empirical part uses micro data on 1,804 privatization contracts and 1,097 liquidation decisions to verify the model predictions. The data confirm the view that political liquidation constraints are an important determinant of privatization outcomes.

Additional Files

The data in this paper is available from the author upon request.