Limited Privatization in the Presence of Public Bads

Abstract

Let us define ‘straight privatization’ of a group of publicly owned firms as the process by which shares of the firms are distributed or sold to citizens, after which such shares can be freely bought and sold on a stock market with prices denominated in normal currency (say, roubles). I shall introduce below a process of ‘limited privatization’, whereby shares of the erstwhile publicly owned firms are distributed to citizens on, let us say, an equal basis, in the form of coupons or vouchers, and then can be traded on a stock market where prices are quoted in coupons only, not in roubles. Roubles cannot purchase stock, and neither can coupons be sold for roubles.