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The Macroeconomic Impact of Privatization

Author

Listed:
  • G. A. Mackenzie

    (International Monetary Fund)

Abstract

Privatization programs can generate substantial sums. This paper argues that, as a general rule, the proceeds of privatization should be treated as financing (and so put "below the line") and not as revenue. Unlike taxation, privatization never reduces private sector wealth. In exceptional cases, it may reduce the propensity to invest, and depress aggregate demand as a tax increase would. Given the difficulty of predicting when this will occur, and its exceptional nature, the receipt of proceeds from privatization does not, in most cases, warrant a relaxation of the stance of fiscal policy to maintain aggregate demand.

Suggested Citation

  • G. A. Mackenzie, 1998. "The Macroeconomic Impact of Privatization," IMF Staff Papers, Palgrave Macmillan, vol. 45(2), pages 363-373, June.
  • Handle: RePEc:pal:imfstp:v:45:y:1998:i:2:p:363-373
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    Citations

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    Cited by:

    1. Lorena Alcázar & Eduardo Nakasone & Máximo Torero, 2007. "Provision of Public Services and Welfare of the Poor: Learning from an Incomplete Electricity Privatization Process in Rural Peru," IDB Publications (Working Papers) 3351, Inter-American Development Bank.
    2. Emanuele Bacchiocchi & Massimo Florio & Mara Grasseni, 2005. "The missing shock: the macroeconomic impact of British Privatizations," Applied Economics, Taylor & Francis Journals, vol. 37(14), pages 1585-1596.
    3. Lami, Endrit & Imami, Drini & Kächelein, Holger, 2016. "Fuelling political fiscal cycles by opportunistic privatization in transition economies: The case of Albania," Economic Systems, Elsevier, vol. 40(2), pages 220-231.
    4. Hileman, Garrick, 2012. "The seven mechanisms for achieving sovereign debt sustainability," Economic History Working Papers 42878, London School of Economics and Political Science, Department of Economic History.
    5. Ghosh Banerjee, Sudeshna & Rondinelli, Dennis A., 2003. "Does Foreign Aid Promote Privatization? Empirical Evidence from Developing Countries," World Development, Elsevier, vol. 31(9), pages 1527-1548, September.
    6. Máximo Torero, 2002. "Peruvian Privatization: Impacts On Firm Performance," Research Department Publications 3169, Inter-American Development Bank, Research Department.
    7. Máximo Torero & Lorena Alcazar & Eduardo Nakasone, 2007. "El suministro de servicios públicos y bienestar social para los pobres. Aprendizaje de la privatización incompleta del sector eléctrico en Perú," Research Department Publications 3233, Inter-American Development Bank, Research Department.

    More about this item

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out

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