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Most recent studies of privatization in Eastern Europe focus on its impact on individual enterprises. In our previous work, we examined this issue from the viewpoint of the future corporate governance structure in Eastern Europe. The aggregate effects of privatization have been largely neglected, perhaps on the assumption that they have no particular bearing on how privatization is to be effected at the enterprise level. It is very important, however, to link the discussion of the various approaches to large-scale privatization with a consideration of other obstacles in the transition to a market economy. These obstacles, which include the weakness of existing capital stock, the absence of a banking system and the absence of capital markets, can be overcome through the use of a combination of design and reliance on market mechanisms. This combination can provide a successful transition to a market economy.




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