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Corruption and positive selection in privatization

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  • Buia, Raluca E.
  • Molinari, M. Cristina

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 have a positive effect on social welfare.

Suggested Citation

  • Buia, Raluca E. & Molinari, M. Cristina, 2012. "Corruption and positive selection in privatization," Research in Economics, Elsevier, vol. 66(4), pages 297-304.
  • Handle: RePEc:eee:reecon:v:66:y:2012:i:4:p:297-304
    DOI: 10.1016/j.rie.2012.05.002
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    References listed on IDEAS

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    Cited by:

    1. Maria Cristina Molinari, 2011. "Corruption in Privatization and Governance Regimes," Working Papers 2011_28, Department of Economics, University of Venice "Ca' Foscari".
    2. M. Molinari, 2014. "A Second Best Theory of Institutional Quality," Public Organization Review, Springer, vol. 14(4), pages 545-559, December.

    More about this item

    Keywords

    Corruption; Privatization; Private versus public provision;

    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • H44 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Goods: Mixed Markets
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out

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