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Privatization, Information and Incentives

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David E. M. Sappington
Joseph E. Stiglitz

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Abstract

In this paper, the choice between public and private provision of goods and services is considered. In practice, both modes of operation involve significant delegation of authority, and thus appear quite similar in some respects. The argument here is that the main difference between the two mod- concerns the transactions cats faced by the government when attempting to intervene in the delegated production activities. Such intervention is generally less costly under public ownership than under private ownership. The greater ease of intervention under public ownership can have its advantages; but the fact that a promise not to intervene is more credible under private production can also have beneficial incentive effects, The Fundamental Privatization Theorem (analogous to The Fundamental Theorem of Welfare Economics) is presented, providing conditions under which government production cannot improve upon private production. The restrictiveness of these conditions is evaluated.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2196.

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Date of creation: Jun 1988
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Handle: RePEc:nbr:nberwo:2196

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  1. Eduardo Saavedra, . "Alternative Institucional Arrangements in Network Utilities: An Incomplete Contracting Approach," ILADES-Georgetown University Working Papers inv116, Ilades-Georgetown University, School of Economics and Bussines. [Downloadable!]
  2. Lindqvist, Erik, 2007. "Will Privatization Reduce Costs?," Working Paper Series in Economics and Finance 660, Stockholm School of Economics. [Downloadable!]
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  3. Qi Quan & Nancy Huyghebaert, 2005. "Share Issuing Privatizations in China: Determinants of Public Share Allocation and Underpricing," LICOS Discussion Papers 16205, LICOS - Centre for Institutions and Economic Performance, K.U.Leuven. [Downloadable!]
  4. Martimort, D. & Sand-Zantman, W., 2004. "Signaling and the Design of Delegated Management for Public Utilities," Cahiers du LASER (LASER Working Papers) 2004.11, LASER (Laboratoire de Science Economique de Richter), Faculty of Economics, University of Montpellier 1. [Downloadable!]
  5. Sang Hyup Lee, 2003. "A Duration Analysis Of The Adoption Of Privatization Policy: Evidence From The Telecommunications Sector In The Asia-Pacific Region," International Economic Journal, Korean International Economic Association, vol. 17(2), pages 65-78, June. [Downloadable!] (restricted)
  6. Nandini Gupta, 2001. "Partial Privatization And Firm Performance: Evidence From India," William Davidson Institute Working Papers Series 426, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
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  7. Yasushi Iwamoto, 2002. "The Fiscal Investment and Loan Program in Transition," CIRJE F-Series CIRJE-F-168, CIRJE, Faculty of Economics, University of Tokyo. [Downloadable!]
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  8. Florencio Lopez-de-Silane, 1996. "Determinants of Privatization Prices," NBER Working Papers 5494, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  9. Martimort, David & De Donder, Philippe & De Villemeur, Étienne, 2003. "An Incomplete Contract Perspective on Public Good Provision," IDEI Working Papers 212, Institut d'Économie Industrielle (IDEI), Toulouse. [Downloadable!]
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  10. Anna Bottasso & Maurizio Conti, 2003. "Cost Inefficiency in the English and Welsh Water Industry: An Heteroskedastic Stochastic Cost Frontier Approach," Economics Discussion Papers 573, University of Essex, Department of Economics. [Downloadable!]
  11. Germà Bel & Antón Costas, 2006. "Do Public Sector Reforms Get Rusty? Local Privatization in Spain," Journal of Policy Reform, Taylor and Francis Journals, vol. 9(1), pages 1-24, March. [Downloadable!] (restricted)
  12. Perotti, Enrico, 2004. "State ownership - a residual role?," Policy Research Working Paper Series 3407, The World Bank. [Downloadable!]
  13. Dalen, Dag Morten & Moen, Espen R, 2003. "The Proper Scope of Governments When Costs are Contractible," CEPR Discussion Papers 3992, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  14. Germa Bel & Anton Costas, 2004. "Do public sector reforms get rusty? An empirical analysis on privatization of solid waste collection," Public Economics 0409014, EconWPA. [Downloadable!]
  15. Joseph E. Stiglitz, 1991. "The Invisible Hand and Modern Welfare Economics," NBER Working Papers 3641, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  16. Stephen Yeaple & Warren Moskowitz, 1995. "The literature on privatization," Research Paper 9514, Federal Reserve Bank of New York. [Downloadable!]
  17. Rebecca M. Blank, 1999. "When Can Public Policy Makers Rely on Private Markets? The Effective Provision of Social Services," NBER Working Papers 7099, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  18. Brennan, Timothy, 2000. "The Economics of Competition Policy: Recent Developments and Cautionary Notes in Antitrust and Regulation," Discussion Papers dp-00-07, Resources For the Future. [Downloadable!]
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