What Drives Asset Stripping in Transition? Theory and Evidence

          with Francesco Giovannoni,

         Published in Journal of Law and Economics 49 (2): 681-706, 2006                                          ( PDF )

During the transition from plan to market, managers and politicians succeeded in maintaining control of large parts of
the stock of socialist physical capital. Despite the obvious importance of this phenomenon, there have been no efforts
to model, measure and investigate this process empirically. This paper tries to fill this gap by putting forward theory and
econometric evidence. We argue that asset stripping is driven by the interplay between the firm’s potential profitability
and its ability to influence law enforcement. Our econometric results, for about 950 firms in five transition economies,
provide support for this argument.  
          Download working paper:        IZA DP 1867        CEPR DP 5886

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