Macroeconomic implications of voucher privatization in a model with incomplete information |
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Authors: | Damien Besancenot Radu Vranceanu |
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Institution: | 1. University of Paris 2 and ERMES , 92 rue d’Assas, Paris, 75007, France;2. ESSEC , BP 105, 95021 Cergy , France, 1211, Geneva, Switzerland |
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Abstract: | Voucher privatization implies a significant wealth transfer from state to private agents who, in turn, would increase consumption. This paper investigates the consequences of this wealth effect on the macroeconomic equilibrium in a high unemployment economy. The model builds on a two-stage sequential game between the government and private agents. We verify the existence of a pooling equilibrium in which private agents cannot guess whether a policy of fast privatization will be continued in the future or not. This configuration presents an endogenous probability of privatization slowdown; as a consequence, the wealth effect is moderated and the genuine fast privatizer government bears an “undue” credibility cost in terms of employment |
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Keywords: | Voucher privatization Transition Wealth effect Pooling and separating equilibria |
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