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The Optimal Choice of Privatizing State-Owned Enterprises: A Political Economic Model

Chen, Yan (1992) The Optimal Choice of Privatizing State-Owned Enterprises: A Political Economic Model. Social Science Working Paper, 808. California Institute of Technology , Pasadena, CA. (Unpublished)

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We study the choice of a maximizing Bureaucrat over privatization policies and their effects on consumer welfare in a transition economy. We study a Bureaucrat whose objective function is maximizing a surplus budget subject to the constraint of staying in office, and a Bureaucrat who maximizes popularity/consumer welfare subject to the constraint of a balanced budget. Other things being equal, both types of Bureaucrat will privatize the sector (firms) with the least market power and the most subsidy first. This is the "cheapest" way to privatize state-owned enterprises. Also, it is shown that it is relatively easier and faster to privatize in a less democratic society.

Item Type:Report or Paper (Working Paper)
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Additional Information:I would like to thank John Ledyard, Kim Border, Morgan Kousser, Peter Ordeshook and Torn Palfrey for all their help and suggestions. I also benefited from discussions with Kay-yut Chen, Peng Lian, Katerina Sherstyuk and Langche Zeng. Financial assistance from the Flight Projects Office of the Jet Propulsion Laboratory (JPL) of NASA to the Program on Organization Design (PrOD) is greatly appreciated. All remaining errors are my own Published as Chen, Yan. "The optimal choice of privatizing state-owned enterprises: A political economic model." Public choice 86, no. 3 (1996): 223-245.
Group:Social Science Working Papers
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Series Name:Social Science Working Paper
Issue or Number:808
Record Number:CaltechAUTHORS:20170828-164419100
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Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:80881
Deposited By: Jacquelyn Bussone
Deposited On:30 Aug 2017 17:59
Last Modified:03 Oct 2019 18:36

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