In many transition economies, insiders controlled state-owned firms, de facto. For such firms, we model the decision about privatization method, focusing on the choice between free distribution (so called ‘mass privatization’) and management-employee buyouts. We incorporate a political...

In their privatization programs, transition governments have frequently given away shares (so-called 'mass privatization'), while maintaining significant minority ownership. We explain the rationality of this behavior for an expected net-revenue maximizing government. Our argument rests on a...