DP6114 Privatisation in Poland: What Was the Government Trying to Achieve?

Author(s): Gianni De Fraja , Barbara M Roberts

Publication Date: February 2007

Keyword(s): Eastern Europe , mixed oligopoly , Poland , privatisation

JEL(s): D63 , I28

Programme Areas: Industrial Organization

Link to this Page: www.cepr.org/pubs/dps/DP6114.asp.asp

This paper uses the sequencing of privatisation to infer the objective pursued by the Polish government in the privatisation of its large manufacturing firms in the second half of the 1990's. We construct a model of mixed oligopoly, and use it to evaluate the privatisation process; our analysis is based on the assumption that firms which furthered the government's objective function the most would be chosen to be privatised first. Our empirical analysis identifies the features of the firms that were chosen for early privatisation, and suggests that the welfare maximisation was more important than the desire to maximise the revenues from privatisation and the government's budget, or to minimise employment losses.