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Private or Public? Towards a Taxonomy of Optimal Ownership and Management Regimes

  • STEPHEN KING
  • ROHAN PITCHFORD

We develop a model to assist policy-makers in their choice between private and public ownership for a broad range of activities, based on managers' ability to divert resources through perks or pet projects. Qualitative information is always required to demonstrate that public ownership is optimal. More 'public' firms are synonymous with greater control of such actions, but generate greater bureaucracy costs. The flat incentives faced by public managers can be socially desirable when commercially productive activities generate large social harms relative to profit, but are undesirable when these activities are either benign or create external social benefits. Applications are discussed. Copyright © 2008 The Economic Society of Australia.

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Article provided by The Economic Society of Australia in its journal Economic Record.

Volume (Year): 84 (2008)
Issue (Month): 266 (09)
Pages: 366-377

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Handle: RePEc:bla:ecorec:v:84:y:2008:i:266:p:366-377
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  1. Oliver Hart & John Moore, 1997. "Default and Renegotiation: A Dynamic Model of Debt," NBER Working Papers 5907, National Bureau of Economic Research, Inc.
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  8. Florencio Lopez-de-Silane & Andrei Shleifer & Robert W. Vishny, 1995. "Privatization in the United States," NBER Working Papers 5113, National Bureau of Economic Research, Inc.
  9. Shapiro, Carl & Willig, Robert D, 1990. "On the Antitrust Treatment of Production Joint Ventures," Journal of Economic Perspectives, American Economic Association, vol. 4(3), pages 113-30, Summer.
  10. Schmidt, Klaus M., 1996. "The costs and benefits of privatization: An incomplete contracts approach," Munich Reprints in Economics 19773, University of Munich, Department of Economics.
  11. Laffont, Jean-Jacques & Tirole, Jean, 1991. "Privatization and Incentives," Journal of Law, Economics and Organization, Oxford University Press, vol. 7(0), pages 84-105, Special I.
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