Determinants of the method of sale in privatization

This paper explores the method of sale in the privatization process and difficulties implementing the most efficient option. In countries where state involvement has been more pervasive, the method of privatization chosen is less often the best available option, improvements in efficiency have been slower, and privatization has brought with it greater political instability. This brings the question of why this has been the case, and what could have been done to smooth the transition. This paper finds that efficient mechanisms become more likely when the government's budget is more strained and when the existing capital markets are deeper.