I have a new working paper out there. It concerns privatisation in Serbia. More precisely, it concerns the process of privatisation in Serbia and how it can be co-opted by rent-seeking actors. Alongside Vladan Ivanovic, Vadim Kufenko, Boris Begovic and Nenad Stanisic, we argue that the process of privatisation was designed to allow rent-seekers to continue to extract rents through stripping former public firms of their assets.
I wish to thank my co-authors for inviting me to help on this paper. Institutions matter in economics, the manner in which they are designed (and emerge) is even more important.
The abstract is below and the paper can be found here:
Normally, privatisation is seen as beneficial. In the case of Serbia, the results are disappointing. This paper considers the failure of privatisation in Serbia – a latecomer in the matter – where privatisation was partly a result of exogenous pressures. In Serbia, a sizeable number of privatised firms were bought by bureaucrats and politicians and all firms were subjected to a period of supervision. We argue that this process of privatisation was designed to allow rentseekers to conserve their privileges through asset stripping and that this explains the failure. In order to do so, we perform empirical analysis of the determinants of liquidation, merger and bankruptcy of privatised firms from 2002 to 2015. We construct a novel data set from primary sources, free of the ‘survivorship bias’ and containing proxies for various types of owners, indirect signs of asset stripping strategy and a broad range of controls. Our results indicate that firms owned by politicians face significantly higher risks of bankruptcy, especially after the end of supervision