The political economy of privatization: Empirical evidence from transition economies

This paper provides systematic evidence for both the cross-country and sector-independent validation of political-economic theories used to explain changes in national property rights arrangements. A political-economic model for privatization will be developed and then tested on progress in large-scale and small-scale privatizations in 14 Central and Eastern European transition economies between 1994 and 2000. It will be proven that divergent levels of progress in large-scale privatization can be explained to a large extent by the structural and financial constraints on political decision-makers and varying national interest group constellations. Small-scale privatization is not significantly determined by political constraints and interest group pressure. This finding supports the assumption that the relative merits of different theories to explain changes in property rights arrangements depend crucially on the specific conditions of initial property arrangements.