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Chicken or Egg. Which Should Come First, Privatisation or Liberalisation?

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  • Giovanni De Fraja

Abstract

This paper identifies an industrial policy instrument in the timing of privatisation, relative to the timing of liberalisation of a public firm's market, defined as the lifting of legal barriers to entry by other firms. It is shown that the long run market competitiveness and the privatised firm efficiency are highly sensitive to this decision, and that the choice whether privatisation should precede liberalisation or vice versa depends on the government's preferences and on the relationship between competitive pressure and cost efficiency of the privatised firm. We identify conditions under which the case in which liberalisation preceeding privatisation Pareto dominates the opposite timing.

Suggested Citation

  • Giovanni De Fraja, 1994. "Chicken or Egg. Which Should Come First, Privatisation or Liberalisation?," Annals of Economics and Statistics, GENES, issue 33, pages 133-156.
    • Handle: RePEc:adr:anecst:y:1994:i:33:p:133-156
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    File URL: http://www.jstor.org/stable/20075940
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    Cited by:

    1. Filippo Belloc & Antonio Nicita, 2012. "Partisan privatizations: assessing the ideological bias," Applied Economics Letters, Taylor & Francis Journals, vol. 19(10), pages 959-963, July.
    2. Filippo Belloc & Antonio Nicita, 2011. "Liberalization-Privatization Paths: Policies and Politics," Department of Economics University of Siena 609, Department of Economics, University of Siena.
    3. Bagdadioglu, Necmiddin & Cetinkaya, Murat, 2010. "Sequencing in telecommunications reform: A review of the Turkish case," Telecommunications Policy, Elsevier, vol. 34(11), pages 726-735, December.
    4. Filippo Belloc & Antonio Nicita & Pier Luigi Parcu, 2011. "Deregulating Telecommunications in Europe: Timing, Path-Dependency, and Institutional Complementarities," RSCAS Working Papers 2011/47, European University Institute.
    5. Belloc, Filippo & Nicita, Antonio & Sepe, Simone M., 2014. "Disentangling liberalization and privatization policies: Is there a political trade-off?," Journal of Comparative Economics, Elsevier, vol. 42(4), pages 1033-1051.

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