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Interaction among New Firm Formation, Privatization, and Business Environment in Transition Countries

Interaction among New Firm Formation, Privatization, and Business Environment in Transition Countries

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The formation of new private firms can facilitate transition from socialism to a market economy. This study uses data from transition economies to investigate the effects of large-scale privatization and the barriers to the establishment of new firms. It finds that large-scale privatization positively affects the formation of new firm, but such effects disappear as the costs of start-up increase. These results imply that both privatization and favorable business environments are necessary for firm creation.

I. Introduction

II. Literature Review

III. Estimation Strategy

IV. Estimation Results

V. Conclusion

References

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