Privatization by local governments in reforming economies : a net worth perspective

In many instances, the ownership of previously state-owned assets has been devolved not to individuals, but to newly established local governments for them to select the appropriate privatization strategy. This paper demonstrates how the application of a measure of the changes in public sector net worth can help clarify the decisionmaking process confronting these new governments. Following an introduction, Section II presents background on the general economic reform program in Hungary and the decentralization program as it applies to Budapest. Section III reviews how the privatization program affects the city of Budapest, while Section IV considers how these changes could be analyzed within the public sector net worth perspective. A final section discusses how a local government net worth perspective could complement a transitional budget perspective. The paper also offers some conjectures about how a lack of clarity about the net worth implications of various policies might interact with the "soft budget" constraints that have traditionally plagued resource allocation in socialist economies. (Author abstract)