The paper analyses foreign investors' activities in East Germany in the context of privatization. Based on FDI theories it attempts to explore their motivations and strategies by investigating their home countries as well as their target industries. About 5 p.c. of all privatized enterprises...

Relational contracts when employed as a tool of economic policy create mutual dependency between State and enterprises. This bluntly contradicts the principles of „Ordnungspolitik" as the key policy device to ensure efficiency on the microeconomic level and growth on the macroeconomic level....

Governments may draft contracts with market agents for allocating subsidies and pursuing specific policy goals. Contract enforcement via binding commitments is difficult, however, when exogenous (environmental) and endogenous (behavioural) risks interact. Analyzing the old debt compromise in...