This paper addresses the economics of mass privatization in Germany, Czechoslovakia, Hungry and Poland; it provides a summary description of the privatization plans in these four countries, assesses the extent of privatization to date and it proposes an analytical framework within which the costs and benefits of the different policies adopted in the four countries can be evaluated. A central concern in this paper is that, in view of the fiscal crisis facing these economies in transition, it is crucial for governments to try and maximise the proceeds from the sale of state assets. Because of the low initial level of private wealth, it is important, in this respect, to let potential buyers borrow from the state or issue claims on future revenues (obtained with the privatized asstets) to the state in order to pay for the privatized firms. Allowing for such non-cash bids removes the government's incentive to delay privatization for fiscal reasons, reduces the governments ability to squander immediately the proceeds form privatization and improves the decentralisation of control by allowing less wealthy but more able bidders to buy the firms they are best suited to run.
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