Dr. Ickes
1. Describe the main features of the privatization process in Russia. What are the major hurdles that must be overcome for privatization to be successful? Be specific.
2. Describe the primary methods of privatization that have been used in transition economies. What are the relative advantages and disadvantages of these various methods?
3. The current market value of shares in privatized Russian enterprises suggests that many enterprises are "under-valued" when compared with "similar" enterprises in western economies. What are the most important factors responsible for this "under-valuation?" Which of these do you think is most important? Explain.
a) To what extent does this under-valuation represent a problem? Is it meaningful to speak of undervalued assets in a market economy? What does this actually mean, if anything, economically?4. "The primary problem of the transition is that anti-social behavior is contagious. If only a few people (enterprises) engage in such behavior it is easy to eliminate, but when the vast majority of society behaves this way the State may collapse." Discuss, providing specific examples wherever possible. What is the economic interpretation of this statement? How important is this problem in the transition? What specific features of the transition can be explained by this phenomenon? Be precise.
b) What factors can be undertaken to enhance the market values of Russian enterprises?
c) Why might enterprise directors resist some of these policies?
5. Two basic viewpoints can be distinguished with respect to privatization. One view suggests that the primary problem of privatization is to create proper incentives within enterprises, primarily through privatization itself. The other view suggests that the key element is to improve the market infrastructure within which enterprises operate. Discuss the relative merits of the two views. What do you think is the most important element for transition?
6. Some observers of the Russian transition claim that the primary explanation of the failure of stabilization was a "lack of credibility on the part of the reformers." Why might credibility be an important factor in stabilization? Why might this explanation be deemed to be too simple? Discuss.
7. What is meant by the term "network capital?" Why, if at all, is this concept useful for studying enterprises in transition? What does this have to do with the notion of disorganization?
8. "The essence of transition is the creation of new relationships between enterprises, based not on the legacy of central planning, but on market-type relationships." Explain the logic of this sentence. Can you provide an explanation of why enterprises may be reluctant to leave their historic ties? What factors in transition make it more costly to create new relationships?
9. Privatization has been more successful in the Czech Republic, Hungary and Russia than in Poland. Yet Poland is the transition economy that returned to positive economic growth first, and that has the highest growth rate of output. What does this tell us about the importance of privatization in the transition process? How has Poland achieved their turnaround; that is, what is the Polish secret to success?
10. What are the major theories that explain the collapse of output in transition economies?
i) Why is the collapse of output in the early stages of transition a theoretical curiosity?11. What is the difference between corporatization and privatization? Be as precise as possible.
ii) Why might the collapse in measured output overstate the true effect?
iii) Which explanations of the output fall make the most sense? Explain.
12. Why is inside-ownership a potential problem in privatization? Under what conditions will inside ownership prevent efficient takeovers of enterprises? Explain. What implications does this have for the design of corporate governance in transition economies?
13. To what extent is there a meaningful tradeoff between efficiency and equity in the design of privatization programs?