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Efficiency effect of privatization in the developing countries

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  • Abdullah Al-Obaidan
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    Abstract

    Privatization gained considerable momentum in the developing world in the 1980s. The motives were many, but the hope for higher economic efficiency underlined the expectations of the implementing governments and agencies in the developing countries. While the merits of a market-based economic system are well established under certain theoretical conditions, far less is known of its empirical relevance in the developing world. Yet, to the best of the author's knowledge, no empirical study has examined the macro-efficiency effect of privatization in the developing countries. Studies concerned with this issue often limit themselves to the impact of privatization at the firm level for a small number of companies and countries. Thus, the current study is an attempt to provide a systematic quantitative measure of the magnitude of the macroeconomic effect of privatization in 45 developing countries. Using the concept of frontier production function, efficiency differences between developing countries with differing degrees of private sector contribution in the economy are estimated. The empirical findings suggest, ceteris paribus, that developing countries can increase the utility of their national resources by approximately 45% simply by converting to market-based economies.

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    File URL: http://www.tandfonline.com/doi/abs/10.1080/00036840010007948
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    Bibliographic Info

    Article provided by Taylor & Francis Journals in its journal Applied Economics.

    Volume (Year): 34 (2002)
    Issue (Month): 1 ()
    Pages: 111-117

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    Handle: RePEc:taf:applec:v:34:y:2002:i:1:p:111-117

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    Cited by:
    1. Hongbin Li & Qian Wang, 2005. "Partial privatization and screening," Applied Economics Letters, Taylor & Francis Journals, vol. 12(11), pages 653-655.
    2. Månsson, Jonas & Salas, Osvaldo, 2006. "Productivity development and privatisation of the potable water and sewage sector in Chile," CAFO Working Papers 2006:5, Centre for Labour Market Policy Research (CAFO), School of Business and Economics, Linnaeus University.
    3. Mohamed Jellal & François-Charles Wolff, 2003. "Privatisation et négociation collective," Revue d’économie du développement, De Boeck Université, vol. 17(1), pages 73-99.
    4. Haselip, James & Hilson, Gavin, 2005. "Winners and losers from industry reforms in the developing world: experiences from the electricity and mining sectors," Resources Policy, Elsevier, vol. 30(2), pages 87-100, June.

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