Does Privatization Enhance or Deter Privatization?

Abstract

Small enterprises, whether start-ups or spin-offs from former state owned enterprises, are a growth engine in post-socialist economies. This paper argues that privatization can either enhance or deter small enterprise formation because of its impact of the local business environment. Using the case of Russia, we show that small-scale privatization deterred small enterprise formation, while large-scale privatization enhanced it.

JEL Classification: P2, L5