Post-Soviet Privatization in the Light of the Coase Theorem (Transaction Costs and Governance Costs)

Abstract

A Coasian theoretical perspective is assumed to be in the background of most post-Soviet economies' privatization drives. The assumption of zero transaction costs underlying the Coase theorem guarantees an efficient reallocation of property rights whatever is their initial distribution. Once this assumption is relaxed, the result predicted by the Coase theorem is less certain and clashes with the nature of the firm as it has been analyzed earlier by Coase himself. This preliminary presentation is used as a critical driver to provide a non-mainstream assessment of privatization objectives in Russia that became so obviously high in the early years of the transition process. A Coasian analysis also helps to figure out the post-privatization firm boundaries and to design in-house restructuring as well as industrial restructuring - between industrial branches. The issue of the firm boundaries is crucial in the relationship between privatization and restructuring. Finally, we come to terms with the analysis of post-privatization property rights and corporate governance and their possible (governance) costs for in-house restructuring. The last section is devoted to an evaluation of standard and non-standard methods of privatization.