IDEAS home Printed from https://ideas.repec.org/a/adr/anecst/y2004i75-76p109-133.html
   My bibliography  Save this article

Privatisations as price reforms: Evaluating consumers' welfare changes in the U.K

Author

Listed:
  • Rinaldo Brau
  • Massimo Florio

Abstract

This paper analyses the effects on consumers' welfare of the privatisation policy carried out in the UK since 1979. The approach we follow evaluates the privatisation of a State owned enterprise within the broader framework of the "policy reform" theory (Drèze and Stern [1990]). By adopting this perspective, the change in consumers' welfare "with" and "without" privatisations can be studied by appropriate welfare measures. We claim that an advantage of our approach is that of being able to provide the required welfare assessment in a simplified way by means of a limited set of information. In particular, we show that a series of welfare measures only based on aggregate information can be used where one accepts the use of first and second order approximations and a few "reasonable" assumptions on the shape of demand functions. These welfare measures are subsequently used for the evaluation of the welfare effects related to price variations in seven British privatised public utilities. We conclude that the contribution to consumers' welfare of the privatisation policy in the UK, when compared to the huge transfers involved in the process, has been rather modest.

Suggested Citation

  • Rinaldo Brau & Massimo Florio, 2004. "Privatisations as price reforms: Evaluating consumers' welfare changes in the U.K," Annals of Economics and Statistics, GENES, issue 75-76, pages 109-133.
  • Handle: RePEc:adr:anecst:y:2004:i:75-76:p:109-133
    as

    Download full text from publisher

    File URL: http://www.jstor.org/stable/20079097
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Roberts, Kevin, 1980. "Price-independent welfare prescriptions," Journal of Public Economics, Elsevier, vol. 13(3), pages 277-297, June.
    2. Dixit, Avinash, 1975. "Welfare effects of tax and price changes," Journal of Public Economics, Elsevier, vol. 4(2), pages 103-123, February.
    3. Guesnerie, Roger, 1977. "On the direction of tax reform," Journal of Public Economics, Elsevier, vol. 7(2), pages 179-202, April.
    4. Auerbach, Alan J., 1985. "The theory of excess burden and optimal taxation," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.),Handbook of Public Economics, edition 1, volume 1, chapter 2, pages 61-127, Elsevier.
    5. Ray, Ranjan, 1999. "Marginal and Non-marginal Commodity Tax Reforms with Rank Two and Rank Three Demographic Demand Systems," Oxford Economic Papers, Oxford University Press, vol. 51(4), pages 689-712, October.
    6. David M. Newbery, 2002. "Privatization, Restructuring, and Regulation of Network Utilities," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262640481, September.
    7. Banks, James & Blundell, Richard & Lewbel, Arthur, 1996. "Tax Reform and Welfare Measurement: Do We Need Demand System Estimation?," Economic Journal, Royal Economic Society, vol. 106(438), pages 1227-1241, September.
    8. Deaton, Angus S & Muellbauer, John, 1980. "An Almost Ideal Demand System," American Economic Review, American Economic Association, vol. 70(3), pages 312-326, June.
    9. Dreze, Jean & Stern, Nicholas, 1990. "Policy reform, shadow prices, and market prices," Journal of Public Economics, Elsevier, vol. 42(1), pages 1-45, June.
    10. Atkinson, Anthony B., 1970. "On the measurement of inequality," Journal of Economic Theory, Elsevier, vol. 2(3), pages 244-263, September.
    11. Ahmad, Ehtisham & Stern, Nicholas, 1984. "The theory of reform and indian indirect taxes," Journal of Public Economics, Elsevier, vol. 25(3), pages 259-298, December.
    12. Deaton, Angus, 1974. "A Reconsideration of the Empirical Implications of Additive Preferences," Economic Journal, Royal Economic Society, vol. 84(334), pages 338-348, June.
    13. Newbery, David M, 1995. "The Distributional Impact of Price Changes in Hungary and the United Kingdom," Economic Journal, Royal Economic Society, vol. 105(431), pages 847-863, July.
    14. Massimo Florio, 2001. "The welfare impact of a privatisation: the British Telecom case-history," Departmental Working Papers 2001-08, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. G. Marletto, 2006. "La politica dei trasporti come politica per l'innovazione: spunti da un approccio evolutivo," Working Paper CRENoS 200605, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
    2. Massimo Florio, 2007. "Electricity Prices as Signals for the Evaluation of Reforms: An Empirical Analysis of Four European Countries," International Review of Applied Economics, Taylor & Francis Journals, vol. 21(1), pages 1-27.

    More about this item

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
    • D6 - Microeconomics - - Welfare Economics

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:adr:anecst:y:2004:i:75-76:p:109-133. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Secretariat General) or (Laurent Linnemer). General contact details of provider: http://edirc.repec.org/data/ensaefr.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.