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The Political Economy of Privatization

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Author Info

  • Bernardo Bortolotti

    (University of Torino and Fondazione Eni Enrico Mattei)

  • Paolo Pinotti

    (Universitat Pompeu Fabra)

Abstract

This paper provides an empirical analysis of the role of political institutions in privatization. The empirical testing relies on a new political database with continuous and time-varying measures of the political-institutional setting, and of the partisan orientation of the executive. Using panel data for 21 industrialized countries in the 1977-1999 period, first we show the likelihood and the extent of privatization to be strongly and positively associated with majoritarian political systems. On the contrary, in consensual democracies privatization seems delayed by a “war of attrition” among different political actors. Second, we identify a partisan determinant of the choice of the privatization method. As theory predicts, right wing executives with re-election concerns design privatization to spread share ownership among domestic voters.

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Bibliographic Info

Paper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2003.45.

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Date of creation: Apr 2003
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Handle: RePEc:fem:femwpa:2003.45

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Keywords: Political institutions; Partisan politics; Privatization;

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References

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  1. Persson, Torsten & Tabellini, Guido, 2001. "Political Institutions and Policy Outcomes: What are the Stylized Facts?," CEPR Discussion Papers 2872, C.E.P.R. Discussion Papers.
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  8. Bruno Biais & Enrico Perotti, 2002. "Machiavellian Privatization," American Economic Review, American Economic Association, vol. 92(1), pages 240-258, March.
  9. Beck, T.H.L. & Clarke, G. & Groff, A. & Keefer , P. & Walsh, P., 2001. "New tools in comparative political economy: The database of political institutions," Open Access publications from Tilburg University urn:nbn:nl:ui:12-3125517, Tilburg University.
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  12. Beck, T.H.L. & Demirgüç-Kunt, A. & Levine, R., 2000. "A new database on financial development and structure," Open Access publications from Tilburg University urn:nbn:nl:ui:12-3125518, Tilburg University.
  13. Bernardo Bortolotti & Marcella Fantini & Domenico Siniscalco, 2001. "Privatisation Around the World: New Evidence from Panel Data," CESifo Working Paper Series 600, CESifo Group Munich.
  14. Andrew Ellul & Marco Pagano, 2006. "IPO Underpricing and After-Market Liquidity," Review of Financial Studies, Society for Financial Studies, vol. 19(2), pages 381-421.
  15. Boozer, Michael A., 1997. "Econometric Analysis of Panel Data Badi H. Baltagi Wiley, 1995," Econometric Theory, Cambridge University Press, vol. 13(05), pages 747-754, October.
  16. Milesi-Ferretti, Gian Maria & Perotti, Roberto & Rostagno, Massimo, 2001. "Electoral Rules and Public Spending," CEPR Discussion Papers 2742, C.E.P.R. Discussion Papers.
  17. Beck, Thorsten & Clarke, George & Groff, Alberto & Keefer, Philip & Walsh, Patrick, 2000. "New tools and new tests in comparative political economy - the database of political institutions," Policy Research Working Paper Series 2283, The World Bank.
  18. Jones, Steven L. & Megginson, William L. & Nash, Robert C. & Netter, Jeffry M., 1999. "Share issue privatizations as financial means to political and economic ends," Journal of Financial Economics, Elsevier, vol. 53(2), pages 217-253, August.
  19. Nouriel Roubini & Jeffrey Sachs, 1988. "Political and Economic Determinants of Budget Deficits in the IndustrialDemocracies," NBER Working Papers 2682, National Bureau of Economic Research, Inc.
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Citations

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Cited by:
  1. Bortolotti, Bernardo & Faccio, Mara, 2006. "Reluctant privatization," CEI Working Paper Series 2006-5, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
  2. Bortolotti, Bernardo & de Jong, Frank & Nicodano, Giovanna & Schindele, Ibolya, 2004. "Privatization and Stock Market Liquidity," SIFR Research Report Series 23, Institute for Financial Research.
  3. Börner, Kira, 2004. "The Political Economy of Privatization," Discussion Papers in Economics 296, University of Munich, Department of Economics.
  4. Kira Boerner, 2004. "The Political Economy of Privatization: Why Do Governments Want Reforms?," Working Papers 2004.106, Fondazione Eni Enrico Mattei.
  5. Polterovich, Victor, 2012. "Приватизация и рациональная структура собственности (Privatizatsiya i ratsional’naya struktura sobstvennosti)
    [Privatization and the Rational Owners
    ," MPRA Paper 41069, University Library of Munich, Germany.
  6. Alberto Cavaliere, 2006. "Privatization and Efficiency: from Principals and Agents to Political Economy," Working Papers 2006.99, Fondazione Eni Enrico Mattei.
  7. Anders Sundell & Victor Lapuente, 2012. "Adam Smith or Machiavelli? Political incentives for contracting out local public services," Public Choice, Springer, vol. 153(3), pages 469-485, December.
  8. Bernardo Bortolotti, 2005. "Political Institutions and Privatisation Policy," CESifo DICE Report, Ifo Institute for Economic Research at the University of Munich, vol. 3(1), pages 12-18, 04.
  9. Boehmer, Ekkehart & Nash, Robert C. & Netter, Jeffry M., 2005. "Bank privatization in developing and developed countries: Cross-sectional evidence on the impact of economic and political factors," Journal of Banking & Finance, Elsevier, vol. 29(8-9), pages 1981-2013, August.
  10. Andreas Kuhlmann, 2005. "Privatization Incentives – A Wage Bargaining Approach," Ifo Working Paper Series Ifo Working Papers No. 18, Ifo Institute for Economic Research at the University of Munich.

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