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Privatization, investment, and ownership efficiency

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  • Pehr-Johan Norbäck
  • Lars Persson

Abstract

We provide a model that explains the following empirical observations: (i) private ownership is more efficient than public ownership, (ii) privatizations are associated with increases in efficiency, and (iii) the increase in efficiency predates the privatization. The two key mechanisms explaining the results are: (i) a government owner keeping control can affect long-run employment levels when investing and (ii) a privatizing government has a stronger incentive to invest than an acquiring firm: the government exploits the fact that investments increase the sales price not only due to the increase in the acquirer's profit, but also due to a reduced profit for the non-acquirer. Copyright 2012 Oxford University Press 2011 All rights reserved, Oxford University Press.

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File URL: http://hdl.handle.net/10.1093/oep/gpr053
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Bibliographic Info

Article provided by Oxford University Press in its journal Oxford Economic Papers.

Volume (Year): 64 (2012)
Issue (Month): 4 (October)
Pages: 765-786

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Handle: RePEc:oup:oxecpp:v:64:y:2012:i:4:p:765-786

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  1. John Bennett & James Maw, 1998. "Privatisation and Market Structure in a Transition Economy," William Davidson Institute Working Papers Series 175, William Davidson Institute at the University of Michigan.
  2. Norbäck, Pehr-Johan & Persson, Lars, 2009. "The Organization of the Innovation Industry: Entrepreneurs, Venture Capitalists and Oligopolists," Working Paper Series 783, Research Institute of Industrial Economics.
  3. Gérard Roland & Khalid Sekkat, 2000. "Managerial career concerns, privatization and restructuring in transition economies," ULB Institutional Repository 2013/7340, ULB -- Universite Libre de Bruxelles.
  4. Bruno Biais & Enrico Perotti, 2002. "Machiavellian Privatization," American Economic Review, American Economic Association, vol. 92(1), pages 240-258, March.
  5. Simeon Djankov & Gerhard Pohl, 1997. "Restructuring of Large Firms in Slovakia," William Davidson Institute Working Papers Series 73, William Davidson Institute at the University of Michigan.
  6. Bennedsen, Morten, 2000. "Political ownership," Journal of Public Economics, Elsevier, vol. 76(3), pages 559-581, June.
  7. Bernardo Bortolotti & Marcella Fantini & Domenico Siniscalco, 2001. "Privatisation Around the World: New Evidence from Panel Data," CESifo Working Paper Series 600, CESifo Group Munich.
  8. Lopez-de-Silanes, Florencio, 1997. "Determinants of Privatization Prices," The Quarterly Journal of Economics, MIT Press, vol. 112(4), pages 965-1025, November.
  9. S. Baranzoni & P. Bianchi & L. Lambertini, 2000. "Market Structure," Working Papers 368, Dipartimento Scienze Economiche, Universita' di Bologna.
  10. Jeffry M. Netter & William L. Megginson, 2001. "From State to Market: A Survey of Empirical Studies on Privatization," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 321-389, June.
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