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The missing shock: the macroeconomic impact of British privatisation

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Author Info
Massimo Florio ()
Mara Grasseni ()

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Abstract

The privatisation policy pursued in the UK by Mrs Thatcher's government (1979-1990) and subsequently by Mr Major's government (1990-1997) was the largest experiment in public divestitures among capitalist economies. It had a deep impact on economic policy-making worlwide, and was vastly imitated, in Western Europe, in the former planned economies, in a number of less developed countries. In this paper we test the impact of privatisation on macroeconomic performance in the United Kingdom using quarterly data from 1979 to 1999. In the econometric model, we use privatisation proceeds as an explanatory variable and we control for several other variables. Testing for cointegration the results show that there is a long run equilibrium relationship between GDP growth and the variables used in the model. However, in our empirical analysis we find a weak evidence that privatisation generated an aggregate shock on output in the UK. This result is consistent with empirical literature on microecononmic evidence that shows that in the UK ownership change per se had little impact on long term productivity trends.

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Paper provided by Department of Economics University of Milan Italy in its series Departemental Working Papers with number 2003-21.

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Date of creation: 01 Jan 2003
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Handle: RePEc:mil:wpdepa:2003-21

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Related research
Keywords: Privatisation; United Kingdom; GDP growth;

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Find related papers by JEL classification:
H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
H82 - Public Economics - - Miscellaneous Issues - - - Governmental Property
L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
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. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
  2. Massimo Florio & Mara Grasseni, 2003. "The missing shock: the macroeconomic impact of British privatisation," Departemental Working Papers 2003-21, Department of Economics University of Milan Italy. [Downloadable!]
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  3. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-80, November. [Downloadable!] (restricted)
  4. Mackenzie, George A, 1997. "The Macroeconomic Impact of Privatization," IMF Papers on Policy Analysis and Assessments 97/9, International Monetary Fund. [Downloadable!]
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  5. Johansen, Soren & Juselius, Katarina, 1994. "Identification of the long-run and the short-run structure an application to the ISLM model," Journal of Econometrics, Elsevier, vol. 63(1), pages 7-36, July. [Downloadable!] (restricted)
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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. Emanuele Bacchiocchi & Massimo Florio & Mara Grasseni, 2005. "The missing shock: the macroeconomic impact of British Privatizations," Applied Economics, Taylor and Francis Journals, vol. 37(14), pages 1585-1596, August. [Downloadable!] (restricted)
    Other versions:
  2. Orietta DESSY & Massimo FLORIO, 2004. "Workers' earnings in the UK before and after privatisation: a study of five industries," Departemental Working Papers 2004-13, Department of Economics University of Milan Italy. [Downloadable!]
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