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Infrastructure privatization and changes in corruption patterns: The roots of public discontent

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  • Martimort, David
  • Straub, Stéphane

Abstract

This paper offers a theory of how the degree of corruption that prevails in a society responds to changes in the ownership structure of major public service providers. We show that there are cases in which privatization, even though it fosters investments in infrastructure, also opens the door to more corruption. The public dissatisfaction towards privatization is then crucially affected by the changes in the degree and pattern of corruption. Our model thus helps understand the seemingly paradoxical situation prevailing in Latin America, where most studies find that privatizations have been efficiency-enhancing and have fostered investments and, at the same time, popular dissatisfaction with the process is extremely high, especially among the middle class. We show that this line of explanation is consistent with the evidence from surveys in the region.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Development Economics.

Volume (Year): 90 (2009)
Issue (Month): 1 (September)
Pages: 69-84

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Handle: RePEc:eee:deveco:v:90:y:2009:i:1:p:69-84

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Web page: http://www.elsevier.com/locate/devec

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Keywords: Privatization Corruption Regulation;

References

References listed on IDEAS
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Citations

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Cited by:
  1. Tan, Jeff, 2012. "The Pitfalls of Water Privatization: Failure and Reform in Malaysia," World Development, Elsevier, vol. 40(12), pages 2552-2563.
  2. Antonio Estache & L. Wren-Lewis, 2009. "Towards a Theory of Regulation for Developing Countries: Following Jean-Jacques Laffont's Lead," ULB Institutional Repository 2013/43903, ULB -- Universite Libre de Bruxelles.
  3. Liam Wren-Lewis, 2011. "Do Infrastructure Reforms Reduce the Effect of Corruption? Theory and Evidence from Latin America and the Caribbean," Working Papers ECARES ECARES 2011-026, ULB -- Universite Libre de Bruxelles.
  4. Stephane Straub, 2008. "Infrastructure and Growth in Developing Countries: Recent Advances and Research Challenges," ESE Discussion Papers 179, Edinburgh School of Economics, University of Edinburgh.
  5. Antonio Estache & Liam Wren-Lewis, 2010. "What Anti-Corruption Policy Can Learn from Theories of Sector Regulation," Working Papers ECARES ECARES 2010-033, ULB -- Universite Libre de Bruxelles.
  6. Berg, Sanford V & Jiang, Liangliang & Lin, Chen, 2011. "Regulation and corporate corruption: new evidence from the telecom sector," MPRA Paper 32947, University Library of Munich, Germany.
  7. Stéphane Straub, 2009. "Regulatory Intervention, Corruption and Competition," Review of Industrial Organization, Springer, vol. 35(1), pages 123-148, September.
  8. Kaminski, Jonathan, 2011. "Subjective Wealth, Policy Change, and Political Opinions: Evidence from the Cotton Reform in Burkina Faso," Discussion Papers 119531, Hebrew University of Jerusalem, Department of Agricultural Economics and Management.
  9. Bonnet, Céline & Dubois, Pierre & Martimort, David & Straub, Stéphane, 2009. "Empirical Evidence on Satisfaction with Privatization in Latin America: Welfare Effects and Beliefs," IDEI Working Papers 566, Institut d'Économie Industrielle (IDEI), Toulouse.
  10. Dong, Quan & Bárcena-Ruiz, Juan Carlos, 2014. "Corruption and decisions on opening up markets," Economic Modelling, Elsevier, vol. 36(C), pages 23-29.
  11. Tomas Otahal, 2013. "Mises, Hayek and Corruption," MENDELU Working Papers in Business and Economics 2013-34, Mendel University in Brno, Faculty of Business and Economics.
  12. Gasmi, F. & Maingard, A. & Noumba, P. & Recuero Virto, L., 2013. "The Privatization of the Fixed-Line Telecommunications Operator in OECD, Latin America, Asia, and Africa: One Size Does Not Fit All," World Development, Elsevier, vol. 45(C), pages 189-208.
  13. Boggio, Margherita, 2011. "From Reluctant Privatization to Municipal Capitalism: an Overview on Ownership, Political Connections and Decentralization," MPRA Paper 46232, University Library of Munich, Germany.

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