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Corruption and Positive Selection in Privatization

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Author Info
Raluca E. Buia () (Advanced School of Economics, University Of Venice Cà Foscari)
M. Cristina Molinari () (Department of Economics, University Of Venice Cà Foscari)

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Abstract

We consider the supply of a public good based on a publicly-owned facility. The Government has a choice between provision in-house and privatizing the facility and then outsourcing the production. In particular, we focus on corruption in the decision to privatize and on its effect on social welfare when there is asymmetric information on the public and private manager's efficiency. Our analysis shows that a corrupt Government, that chooses to privatize only in exchange for a bribe, makes a positive selection on the private firm's efficiency and, thus, may raise expected social welfare above what an honest Government could get.

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Publisher Info
Paper provided by University of Venice "Ca' Foscari", Department of Economics in its series Working Papers with number 2008_43.

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Length: 17
Date of creation: 2008
Date of revision:
Handle: RePEc:ven:wpaper:2008_43

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Related research
Keywords: Corruption; Privatization; Private vs. public provision.;

Find related papers by JEL classification:
D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
H44 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Goods: Mixed Markets
K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Boundaries of Public and Private Enterprise; Privatization; Contracting Out

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This page was last updated on 2009-11-25.

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