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Privatization and Changes in Corruption Patterns: The Roots of Public Discontent

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  • David Martimort
  • Stephane Straub

    ()

Abstract

This 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 Info

Paper provided by Edinburgh School of Economics, University of Edinburgh in its series ESE Discussion Papers with number 147.

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Length: 39
Date of creation: Dec 2006
Date of revision:
Handle: RePEc:edn:esedps:147

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References

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  1. Faure-Grimaud Antoine & Laffont Jean-Jacques & Martimort David, 2003. "Risk Averse Supervisors and the Efficiency of Collusion," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 2(1), pages 1-32, January.
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  3. Faure-Grimaud, Antoine & Martimort, David, 2003. " Regulatory Inertia," RAND Journal of Economics, The RAND Corporation, vol. 34(3), pages 413-37, Autumn.
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Citations

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Cited by:
  1. Guasch, J. Luis & Straub, Stphane, 2009. "Corruption and concession renegotiations.: Evidence from the water and transport sectors in Latin America," Utilities Policy, Elsevier, vol. 17(2), pages 185-190, June.
  2. Athias, Laure & Saussier, Stéphane, 2007. "Contractual flexibility or rigidity for public private partnerships? Theory and evidence from infrastructure concession contracts," MPRA Paper 10541, University Library of Munich, Germany.
  3. Auriol, Emmanuelle & Blanc, Aymeric, 2008. "Capture and Corruption in Public Utilities: the Cases of Water and Electricity in Sub-Saharan Africa," IDEI Working Papers 505, Institut d'Économie Industrielle (IDEI), Toulouse.
  4. 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.
  5. Straub, Stephane, 2008. "Infrastructure and growth in developing countries : recent advances and research challenges," Policy Research Working Paper Series 4460, The World Bank.
  6. Kaminski, Jonathan, 2008. "Wealth, Living Standards and Perceptions in a Cotton Economy: Evidence from the Cotton Reform in Burkina Faso," Discussion Papers 45780, Hebrew University of Jerusalem, Department of Agricultural Economics and Management.
  7. Athias, Laure & Nunez, Antonio, 2008. "The more the merrier? Number of bidders, information dispersion, renegotiation and winner’s curse in toll road concessions," MPRA Paper 10539, University Library of Munich, Germany.
  8. Straub, Stéphane, 2009. "Governance in Water Supply," TSE Working Papers 09-029, Toulouse School of Economics (TSE).
  9. Berg, Sanford V & Jiang, Liangliang & Lin, Chen, 2011. "Regulation and corporate corruption: new evidence from the telecom sector," MPRA Paper 32947, University Library of Munich, Germany.
  10. Vásquez, William F., 2011. "Household preferences and governance of water services: A hedonic analysis from rural Guatemala," IFPRI discussion papers 1152, International Food Policy Research Institute (IFPRI).
  11. Claude Ménard, 2011. "Is Public-Private Partnership Obsolete?," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00653090, HAL.
  12. Elisabetta Iossa & David Martimort, 2008. "The Simple Micro-Economics of Public-Private Partnerships," CEIS Research Paper 139, Tor Vergata University, CEIS, revised 15 Feb 2013.

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