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The Political Economy of Privatization

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  • Börner, Kira

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 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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Bibliographic Info

Paper provided by University of Munich, Department of Economics in its series Discussion Papers in Economics with number 296.

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Date of creation: Jan 2004
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Handle: RePEc:lmu:muenec:296

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Keywords: political incentives ; privatization ; restructuring ; employment;

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