The Big Sell: Privatizing East Germany's Economy

Departing from communism, East Germany witnessed history’s most extensive privatization program. While the program sparked global interest as a blueprint for privatization, its effectiveness remains disputed. Using unique firm-level data, we examine the program’s objective to privatize the most competitive firms. We document that firms with higher baseline productivity are more likely to be privatized, yield higher prices, are more often acquired by West Germans, and are more likely to survive 20 years later. Inspecting the inner workings of the privatization agency, we illustrate challenges and lessons for government interventions attempting to target the right firms to promote policy goals.

Mergele, Lukas, Moritz Hennicke and Moritz Lubczyk (2020), The Big Sell: Privatizing East Germany's Economy, ZEW Discussion Paper No. 20-043, Mannheim.