Privatization In Eastern Germany: A Neo-institutional Analysis

This book gives the first comprehensive analysis of privatization and restructuring by the Treuhandanstalt in East Germany. It also addresses the theoretical and conceptual problems of large-scale privatization in the transformation process. Contrary to many transition economies, the East German privatization approach was based on the sale of state-owned companies to strategic investors under the constraint of a mixed set of allocative criteria, including employment and investment objectives. In order to achieve these objectives, the Treuhandanstalt frequently granted huge subsidies to private investors. This required the negotiation and enforcement of complex contracts. Their approach encountered widespread criticism in the public as well as the academic literature.
The author's study first discusses the effects of different privatization procedures in transition economies on the allocation and distribution of property rights, using the framework of the neo-institutionalist approach. Second, it investigates the privatization strategy of the Treuhandanstalt under the specific macroeconomic and institutional conditions of German unification. Finally, it analyses the problems of the agreement and enforcement of employment and investment objectives in privatization contracts under incomplete information, based on a game-theoretical model.