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Privatisation and X-Inefficiency: A Bargaining Approach

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  • Haskel, Jonathan
  • Sanchis, Amparo

Abstract

The usual analysis of privatization and X-inefficiency uses agency theory to model managerial effort. The authors model worker effort as determined by a bargain between firms and workers. Workers dislike effort because it lowers utility. Firms prefer high effort because it raises productivity. Public sector firms are assumed to be social welfare maximizers and therefore, compared to private sector firms, they bargain lower effort levels since they have the interests of consumers and workers at heart. The authors' model predicts that, under certain conditions, privatization should raise effort and so lower X-inefficiency, and that wages may increase or decrease. Copyright 1995 by Blackwell Publishing Ltd.

Suggested Citation

  • Haskel, Jonathan & Sanchis, Amparo, 1995. "Privatisation and X-Inefficiency: A Bargaining Approach," Journal of Industrial Economics, Wiley Blackwell, vol. 43(3), pages 301-321, September.
    • Handle: RePEc:bla:jindec:v:43:y:1995:i:3:p:301-21
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    JEL classification:

    • J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out

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