5. Conclusions
Transition countries are characterized by massive privatizations during the first decade(s) of transition. Privatization, in addition to improving the efficiency of formerly publicly owned economic units, may serve as a source of income for the economy. Therefore it may be assumed that when an elected official needs funds to finance certain public expenditures, there is a stronger incentive to engage in privatization. Elections are a typical example of a time in which public investments and other types of public expenditures increase. As predicted by the political business cycles theory, a political incumbent may engage in fiscal expansion before elections in order to increase the likelihood of re-election. This was found to be true for Albania in previous research. In this study, we found a statistically significant increase in income from privatization before elections, providing the incumbents with funds to finance the increased expenditures before elections. The empirical evidence unambiguously indicates that the privatization of public assets in Albania systematically shifts close to parliamentary elections. Namely, privatization receipts increase significantly before elections and drop significantly immediately afterwards. The privatization of public assets is an important part of a country’s structural reforms, especially in those transition countries that had centralized economies and are moving toward free market economies. However, while transition countries do not necessarily have to privatize all kinds of public assets, they should make very careful assessments of what is really worth privatizing and, most importantly, seek the “best” deal for each public asset it chooses to privatize.
