In low-income countries privatization, if implemented appropriately, may play an
important role in generating growth. Using data recently available from Central and
Eastern Europe, we therefore investigate the impact of alternative methods of
privatization on economic growth. Our analysis suggests that the use of conventional
privatization methods to match owners with firms can be inefficient in economies
with underdeveloped capital markets, particularly if wealth is poorly correlated with
managerial and entrepreneurial ability. In these circumstances mass privatization,
with firms being given away or sold at a nominal price, may be the appropriate policy
choice
