Template-Type: ReDIF-Paper 1.0
Title: Mass Privatization, Management Control and Efficiency
Author-Name: Dieter B”s
Author-Name: Phillipp Harms
Abstract: We present a model where a government chooses the number of
  	individuals to which ownership in a former state-owned firm shall be
  	allocated. When making this decision the government maximizes the
  	political support it gets from the firm's incumbent manager and from
  	potential shareholders, anticipating that a greater dispersion of
  	shares reduces the control of the manager by the firm's new owners.
  	It turns out that shares will be allocated to the maximum number of
  	individuals - and thus a policy of mass privatization will be
  	implemented -  if the manager's utility enters the political support
  	function with a higher weight than the welfare of the potential
  	shareholders. The result of the political process, however, need not
  	conflict with the objective of achieving a Pareto-optimal
  	allocation. Thus we contradict a widely shared presumption that mass
  	privatization schemes sacrifice efficiency to satisfy political
  	constraints and show that they can be very attractive from an
  	efficiency point of view.
Keywords: Privatization, Vouchers, Economic Reform
Classification-JEL: L33; P21
Series: SFB Discussion Paper
Number: 475
Creation-Date: 1995-03
File-URL: http://www.wiwi.uni-bonn.de/bgsepapers/bonsfa/bonsfa475.ps
File-Format: Application/PostScript
File-Size: 18
Handle: RePEc:bon:bonsfa:475