Privatization and Changes in Corruption Patterns: The Roots of Public Discontent
AbstractThis 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 supported by evidence from surveys in the region.
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Bibliographic InfoPaper provided by Edinburgh School of Economics, University of Edinburgh in its series ESE Discussion Papers with number 147.
Date of creation: Dec 2006
Date of revision:
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-12-09 (All new papers)
- NEP-PBE-2006-12-09 (Public Economics)
- NEP-REG-2006-12-09 (Regulation)
- NEP-SOC-2006-12-09 (Social Norms & Social Capital)
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