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The missing shock: the macroeconomic impact of British privatisation

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  • Massimo Florio

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  • Mara Grasseni

    ()

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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Bibliographic Info

Paper provided by Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano in its series Departmental 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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Keywords: Privatisation; United Kingdom; GDP growth;

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References

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  1. Davidson, James E H, et al, 1978. "Econometric Modelling of the Aggregate Time-Series Relationship between Consumers' Expenditure and Income in the United Kingdom," Economic Journal, Royal Economic Society, vol. 88(352), pages 661-92, December.
  2. Søren Johansen & Katarina Juselius, 1992. "Identification of the Long-Run and the Short-Run Structure: An Application to the ISLM Model," Discussion Papers 92-04, University of Copenhagen. Department of Economics.
  3. Massimo Florio & Mara Grasseni, 2004. "The Missing Shock: The Macroeconomic Impact of British Privatisation," Working Papers 2004.104, Fondazione Eni Enrico Mattei.
  4. repec:imf:imfpdp:97/9 is not listed on IDEAS
  5. G. A. Mackenzie, 1998. "The Macroeconomic Impact of Privatization," IMF Staff Papers, Palgrave Macmillan, vol. 45(2), pages 363-373, June.
  6. 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.
  7. Steven Barnett, 2000. "Evidenceon the Fiscal and Macroeconomic Impact of Privatization," IMF Working Papers 00/130, International Monetary Fund.
  8. 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.
  9. Willem H. Buiter, 1990. "Principles of Budgetary and Financial Policy," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262524139, December.
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Cited by:
  1. Massimo Florio & Mara Grasseni, 2004. "The Missing Shock: The Macroeconomic Impact of British Privatisation," Working Papers 2004.104, Fondazione Eni Enrico Mattei.
  2. Orietta DESSY & Massimo FLORIO, 2004. "Workers' earnings in the UK before and after privatisation: a study of five industries," Departmental Working Papers 2004-13, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
  3. Schuster, Philipp & Schmitt, Carina & Traub, Stefan, 2013. "The retreat of the state from entrepreneurial activities: A convergence analysis for OECD countries, 1980–2007," European Journal of Political Economy, Elsevier, vol. 32(C), pages 95-112.

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