Privatization in Latin America: What Does the Evidence Say?
Privatization is under attack. Criticisms run from corrupt deals to abuse of market power and social welfare losses. We evaluate the empirical record on privatization, relying on recent comprehensive studies from Latin America. The paper presents four main results. First, the increased profitability of privatized firms is not explained by sample selection biases. Second, in the quest to identify the sources of increased profitability after privatization, we find little evidence that validates concerns of generalized market power abuses, exploitation of workers, and lack of fiscal benefits. Third, the manner in which privatization is carried out matters. Transparency and homogeneity in procedures, speed, and limited restructuring prior to privatization lead to better outcomes and less room for corruption and discretion. Finally, privatization´s success is enhanced by two complementary policies: deregulation or reregulation of industries previously shielded from competitive forces; and an effective corporate governance framework that facilitates privatized firms´ access to capital at lower cost. Overall, the empirical record shows that privatization leads to increased profitability and productivity, firm restructuring, fiscal benefits, output growth, and even quality improvements. Most cases of privatization failure can be linked to poor contract design, opaque processes with heavy state involvement, lack of reregulation, and a poor corporate governance framework.
Volume (Year): Volume 4 Number 2 (2004)
Issue (Month): Spring 2004 (January)
|Contact details of provider:|| |
When requesting a correction, please mention this item's handle: RePEc:col:000425:008674. 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: (Roberto Bernal)
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 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.