Entry, productivity, and investment
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The transition in Eastern Europe from a planned and governmentally-owned economy to a free market system has been discussed primarily in terms of the transfer of ownership of existing firms and productive assets from the government sector to private hands. It appears to me that this process of privatization has proceeded more rapidly that is optimal and has eclipsed an alternative process of private capital acquisition and creation, namely through entry. The process of privatization implies retention of the capital structure and, to some extent at least, of the organizational structure of the previous regime.
KeywordsDiscount Rate Production Function Capital Structure Fixed Cost Marginal Return
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