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Politics and privatization in Central and Eastern Europe

A panel data analysis


  •  The authors are grateful for comments on earlier versions from Viktor Brech, Carsten Hefeker, Arye Hillman, Mogens Kamp Justesen, Ed Lopez, Brian Mandau, Bernd Potrafke, Heinrich Ursprung, Roland Vaubel and the participants of the Research Seminar of the University of Groningen in August 2008, the Brown Bag Seminar of the University of Konstanz in November 2008, the Public Choice Society Meeting 2009 in Las Vegas, the European Public Choice Society Meeting 2009 in Athens, the International Panel Data Conference 2009 in Bonn, the Silvaplana Workshop on Political Economy 2009 and the conference on ‘20 Years of Transition in Central and Eastern Europe’ in London.


This article examines how government ideology influenced privatization efforts in Central and Eastern Europe after the transition from socialism. We analyse a dataset of privatization indicators covering small- and large-scale industries in 19 transition countries over the period 1990–2007 and introduce a government ideology index. The results suggest that market-oriented governments promoted the privatization of small-scale industries more than that of large-scale ones. In the rapid transition process in the early 1990s, leftist governments stuck to public ownership more strongly than in the following period from the mid-1990s to 2007. The remarkable differences between leftist and right-wing governments concerning both the role of government in the economy and the basic elements of political order are in line with developments in OECD countries, and may also hold further implications for transition and democratizing countries outside Central and Eastern Europe.