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Efficiency effect of privatization in the developing countries

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  • Abdullah Al-Obaidan

Abstract

Privatization gained considerable momentum in the developing world in the 1980s. The motives were many, but the hope for higher economic efficiency underlined the expectations of the implementing governments and agencies in the developing countries. While the merits of a market-based economic system are well established under certain theoretical conditions, far less is known of its empirical relevance in the developing world. Yet, to the best of the author's knowledge, no empirical study has examined the macro-efficiency effect of privatization in the developing countries. Studies concerned with this issue often limit themselves to the impact of privatization at the firm level for a small number of companies and countries. Thus, the current study is an attempt to provide a systematic quantitative measure of the magnitude of the macroeconomic effect of privatization in 45 developing countries. Using the concept of frontier production function, efficiency differences between developing countries with differing degrees of private sector contribution in the economy are estimated. The empirical findings suggest, ceteris paribus, that developing countries can increase the utility of their national resources by approximately 45% simply by converting to market-based economies.

Suggested Citation

  • Abdullah Al-Obaidan, 2002. "Efficiency effect of privatization in the developing countries," Applied Economics, Taylor & Francis Journals, vol. 34(1), pages 111-117.
  • Handle: RePEc:taf:applec:v:34:y:2002:i:1:p:111-117
    DOI: 10.1080/00036840010007948
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    Cited by:

    1. Haselip, James & Hilson, Gavin, 2005. "Winners and losers from industry reforms in the developing world: experiences from the electricity and mining sectors," Resources Policy, Elsevier, vol. 30(2), pages 87-100, June.
    2. Samuel Adams & Berhanu Mengistu, 2008. "The Political Economy of Privatization in Sub-Saharan Africa," Social Science Quarterly, Southwestern Social Science Association, vol. 89(1), pages 78-94.
    3. Mohamed Jellal & François-Charles Wolff, 2003. "Privatisation et négociation collective," Revue d’économie du développement, De Boeck Université, vol. 11(1), pages 73-99.
    4. Ghulam, Yaseen & Jaffry, Shabbar, 2015. "Efficiency and productivity of the cement industry: Pakistani experience of deregulation and privatisation," Omega, Elsevier, vol. 54(C), pages 101-115.
    5. Månsson, Jonas & Salas, Osvaldo, 2006. "Productivity development and privatisation of the potable water and sewage sector in Chile," CAFO Working Papers 2006:5, Linnaeus University, Centre for Labour Market Policy Research (CAFO), School of Business and Economics.
    6. Hongbin Li & Qian Wang, 2005. "Partial privatization and screening," Applied Economics Letters, Taylor & Francis Journals, vol. 12(11), pages 653-655.
    7. repec:eee:crpeac:v:21:y:2010:i:5:p:374-389 is not listed on IDEAS

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