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Infrastructure and Public Utilities Privatization in Developing Countries

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  • Auriol, Emmanuelle
  • Picard, Pierre M

Abstract

The paper analyses governments’ trade-off between fiscal benefits and consumer surplus in privatization reforms of noncompetitive industries in developing countries. Under privatization, the control rights are transferred to private interests so that public subsidies decline. This benefit for tax-payers comes at the cost of price increases for consumers. In developing countries, tight budget constraints imply that privatization may be optimal for low profitability segments. For highly profitable public utilities, the combination of allocative inefficiency and critical budgetary conditions may favour public ownership. Finally, once a market segment gives room for more than one firm, governments prefer to regulate the industry. In the absence of a credible regulatory agency, regulation is achieved through public ownership.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6018.

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Date of creation: Dec 2006
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Handle: RePEc:cpr:ceprdp:6018

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Keywords: developing countries; government budget constraint; infrastructure; privatization; public utilities; regulation;

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References

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Citations

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Cited by:
  1. Antonio Estache & L. Wren-Lewis, 2008. "Towards a Theory of Regulation for Developing Countries: Following Laffont's Lead," Working Papers ECARES 2008_018, ULB -- Universite Libre de Bruxelles.
  2. Razvan Catalin DOBREA & Nadia CIOCOIU & Stelian TIPA, 2010. "Investments characteristics in infrastructure industry," Economia. Seria Management, Faculty of Management, Academy of Economic Studies, Bucharest, Romania, vol. 13(1), pages 204-210, June.
  3. Auriol, Emmanuelle & Picard, Pierre M, 2011. "A Theory of BOT Concession Contracts," CEPR Discussion Papers 8323, C.E.P.R. Discussion Papers.
  4. Unal Zenginobuz & Haldun Evrenk, 2009. "Regulation Through a Revenue Contest," Working Papers 2009/01, Bogazici University, Department of Economics.
  5. Auriol, Emmanuelle & Biancini, Sara, 2013. "Powering up developing countries through integration ?," Policy Research Working Paper Series 6494, The World Bank.

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