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Infrastructure and public utilities privatization in developing countries

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  • Auriol, Emmanuelle
  • Picard, Pierre M.

Abstract

The paper analyzes governments'tradeoff between fiscal benefits and consumer surplus in privatization reforms of noncompetitive industries in developing countries. Under privatization, the control rights are transferred to private interests so that public subsidies decline. This benefit for tax-payers comes at the cost of price increases for consumers. In developing countries, tight budget constraints imply that privatization may be optimal for low profitability segments. For highly profitable public utilities, the combination of allocative inefficiency and critical budgetary conditions may favor public ownership. Finally, once a market segment gives room for more than one firm, governments prefer to regulate the industry. In the absence of a credible regulatory agency, regulation is achieved through public ownership.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 3950.

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Date of creation: 01 Jun 2006
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Handle: RePEc:wbk:wbrwps:3950

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Keywords: Economic Theory&Research; Public Sector Economics&Finance; Privatization; Markets and Market Access; State Owned Enterprise Reform;

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References

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Citations

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Cited by:
  1. Auriol, Emmanuelle & Picard, Pierre, 2011. "A Theory of BOT Concession Contracts," IDEI Working Papers, Institut d'Économie Industrielle (IDEI), Toulouse 667, Institut d'Économie Industrielle (IDEI), Toulouse.
  2. Unal Zenginobuz & Haldun Evrenk, 2009. "Regulation Through a Revenue Contest," Working Papers, Bogazici University, Department of Economics 2009/01, Bogazici University, Department of Economics.
  3. Razvan Catalin DOBREA & Nadia CIOCOIU & Stelian TIPA, 2010. "Investments characteristics in infrastructure industry," Economia. Seria Management, Faculty of Management, Academy of Economic Studies, Bucharest, Romania, vol. 13(1), pages 204-210, June.
  4. Auriol, Emmanuelle & Biancini, Sara, 2013. "Powering up developing countries through integration ?," Policy Research Working Paper Series 6494, The World Bank.
  5. Antonio Estache & L. Wren-Lewis, 2008. "Towards a Theory of Regulation for Developing Countries: Following Laffont's Lead," Working Papers ECARES, ULB -- Universite Libre de Bruxelles 2008_018, ULB -- Universite Libre de Bruxelles.

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