The Big Sell: Privatizing East Germany's Economy

Arbeitspapier

The end of communism in the 1990s probably is the most fundamental restructuring of institutions witnessed in recent history. At its core was the large-scale redistribution of previously state-owned companies. We construct a unique firm-level dataset to study this redistribution in East Germany where the entire state-owned economy was either privatized or liquidated within less than five years. We examine whether the privatization authority followed its mandate to privatize competitive firms using initial labor productivity to indicate firms' competitiveness. Our results highlight that firms with higher baseline productivity are more likely to be privatized, yield higher sales prices, are more often acquired by West German investors, and are more likely to remain in business even 20 years after leaving public ownership. The privatization agency plausibly contributed to these outcomes by rating and prioritizing productive firms.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 8566

Classification and Topics

• Classification: Wirtschaft ; Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity ; Corporate Finance and Governance: Government Policy and Regulation ; Structure, Scope, and Performance of Government ; Comparison of Public and Private Enterprises and Nonprofit Institutions; Privatization; Contracting Out ; Socialist Enterprises and Their Transitions
• Subject: privatization ; labor productivity ; German reunification

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Mergele, Lukas ; Hennicke, Moritz ; Lubczyk, Moritz
• Event: Veröffentlichung
• (who): Center for Economic Studies and Ifo Institute (CESifo)
• (where): Munich
• (when): 2020

Further information

• Handle: http://hdl.handle.net/10419/226268
• Last update: 10.03.2025, 11:42 AM CET