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Corruption and Positive Selection in Privatization

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  • Raluca E. Buia

    ()
    (Advanced School of Economics, University Of Venice Cà Foscari)

  • M. Cristina Molinari

    ()
    (Department of Economics, University Of Venice Cà Foscari)

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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Bibliographic Info

Paper provided by Department of Economics, University of Venice "Ca' Foscari" 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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Keywords: Corruption; Privatization; Private vs. public provision.;

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  1. Lien, Da-Hsiang Donald, 1986. "A note on competitive bribery games," Economics Letters, Elsevier, Elsevier, vol. 22(4), pages 337-341.
  2. Andrei Shleifer, 1998. "State Versus Private Ownership," NBER Working Papers 6665, National Bureau of Economic Research, Inc.
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  9. Ming Lu & Zhao Chen & Shuang Zhang, 2008. "Paying for the Dream of Public Ownership: Case Studies on Corruption and Privatization in China," Transition Studies Review, Springer, Springer, vol. 15(2), pages 355-373, September.
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  15. Clark, Derek J. & Riis, Christian, 2000. "Allocation efficiency in a competitive bribery game," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 42(1), pages 109-124, May.
  16. George Emm Halkos & Nickolaos Tzeremes, 2010. "Corruption and Economic Efficiency: Panel Data Evidence," Global Economic Review, Taylor & Francis Journals, Taylor & Francis Journals, vol. 39(4), pages 441-454.
  17. Lui, Francis T, 1985. "An Equilibrium Queuing Model of Bribery," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 93(4), pages 760-81, August.
  18. Murphy, Kevin M & Shleifer, Andrei & Vishny, Robert W, 1993. "Why Is Rent-Seeking So Costly to Growth?," American Economic Review, American Economic Association, American Economic Association, vol. 83(2), pages 409-14, May.
  19. Albert Chong & Florencio López-de-Silanes, 2004. "Privatization in Latin America: What Does the Evidence Say?," JOURNAL OF LACEA ECONOMIA, LACEA - LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION.
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Cited by:
  1. Maria Cristina Molinari, 2011. "Corruption in Privatization and Governance Regimes," Working Papers, Department of Economics, University of Venice "Ca' Foscari" 201_28, Department of Economics, University of Venice "Ca' Foscari".

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