Privatization and X-Inefficiency: A Bargaining Approach
AbstractThe usual analysis of privatization and X-inefficiency uses agency theory to model managerial effort. We 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 compared to private-sector firms, therefore, they bargain lower effort levels since they have the interests of consumers and workers at heart. Our model predicts that under certain conditions privatization should raise effort and so lower X-inefficiency, and that wages may increase or decrease.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 1192.
Date of creation: Jun 1995
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Other versions of this item:
- Haskel, Jonathan & Sanchis, Amparo, 1995. "Privatisation and X-Inefficiency: A Bargaining Approach," Journal of Industrial Economics, Wiley Blackwell, vol. 43(3), pages 301-21, September.
- 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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