The big sell: Privatizing East Germany’s economy

Abstract

Departing from communism, East Germany witnessed history’s most extensive privatization program. While the program sparked global interest as a blueprint for economic transformation, 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 how governments can design and implement industrial policy goals.