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The Political Economy of Privatization: Why Do Governments Want Reforms?

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Author Info
Kira Boerner (Department of Economics, University of Munich)

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Abstract

International organizations promote privatization as precondition for economic development. But is there really too little privatization? This political economy model asks for the incentives of governments to privatize or restructure a state-owned firm. Different government types are compared to identify the political and institutional determinants of privatization. Under privatization, governments commit not to in influence the profit-maximizing employment choice by private investors. With respect to the social optimum, both voter-oriented and egoistic governments can have inefficiently high incentives to privatize. When this is the case, outside pressure to privatize is detrimental. An improving institutional environment reduces these inefficiencies.

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Paper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2004.106.

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Date of creation: Jul 2004
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Handle: RePEc:fem:femwpa:2004.106

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Related research
Keywords: Political incentives Privatization Restructuring Employment

Other versions of this item:

Find related papers by JEL classification:
D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Models of Political Processes: Rent-seeking, Elections, Legislatures, and Voting Behavior
D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
H82 - Public Economics - - Miscellaneous Issues - - - Governmental Property
L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Boundaries of Public and Private Enterprise; Privatization; Contracting Out

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Yarrow, George, 1999. "A theory of privatization, or why bureaucrats are still in business," World Development, Elsevier, vol. 27(1), pages 157-168, January. [Downloadable!] (restricted)
  2. Bennedsen, Morten, 2000. "Political ownership," Journal of Public Economics, Elsevier, vol. 76(3), pages 559-581, June. [Downloadable!] (restricted)
  3. Schmidt, Klaus M, 1996. "The Costs and Benefits of Privatization: An Incomplete Contracts Approach," Journal of Law, Economics and Organization, Oxford University Press, vol. 12(1), pages 1-24, April.
  4. Boycko, Maxim & Shleifer, Andrei & Vishny, Robert W, 1996. "A Theory of Privatisation," Economic Journal, Royal Economic Society, vol. 106(435), pages 309-19, March. [Downloadable!] (restricted)
  5. Schmidt,Klaus Schnitzer,Monika, 1992. "Privatization and management incentives in the transition period in Eastern Europe," Discussion Paper Serie A 374, University of Bonn, Germany.
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  6. Bruno Biais & Enrico Perotti, 2002. "Machiavellian Privatization," American Economic Review, American Economic Association, vol. 92(1), pages 240-258, March. [Downloadable!] (restricted)
  7. Bernardo Bortolotti & Paolo Pinotti, 2003. "The Political Economy of Privatization," Working Papers 2003.45, Fondazione Eni Enrico Mattei. [Downloadable!]
  8. Shirley, Mary & Walsh, Patrick, 2000. "Public versus private ownership : the current state of the debate," Policy Research Working Paper Series 2420, The World Bank. [Downloadable!]
  9. Schmidt, Klaus M., 2000. "The political economy of mass privatization and the risk of expropriation," European Economic Review, Elsevier, vol. 44(2), pages 393-421, February. [Downloadable!] (restricted)
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  10. Boss, Dieter & Harms, Phillipp, 1997. "Mass privatization, management control and efficiency," Journal of Public Economics, Elsevier, vol. 64(3), pages 343-357, June. [Downloadable!] (restricted)
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  11. Monika Schnitzer, 2003. "Privatisierung in Osteuropa: Strategien und Ergebnisse," Perspektiven der Wirtschaftspolitik, Blackwell Publishing, vol. 4(3), pages 359-378, 08. [Downloadable!] (restricted)
  12. William L. Megginson & Jeffry M. Netter, 2001. "From State to Market: A Survey of Empirical Studies on Privatization," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 321-389, June. [Downloadable!] (restricted)
  13. Shleifer, Andrei & Vishny, Robert W, 1994. "Politicians and Firms," The Quarterly Journal of Economics, MIT Press, vol. 109(4), pages 995-1025, November. [Downloadable!] (restricted)
  14. Biais, Bruno & Perotti, Enrico C, 1998. "Machiavellian Underpricing," CEPR Discussion Papers 2014, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  15. Laffont, Jean-Jacques & Tirole, Jean, 1991. "Privatization and Incentives," Journal of Law, Economics and Organization, Oxford University Press, vol. 7(0), pages 84-105, Special I.
    Other versions:
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Martin Gregor, 2007. "The Pros and Cons of Banking Socialism," Working Papers IES 2007/03, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Jan 2007. [Downloadable!]
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