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Public enterprises, planning and policy adoption: three welfare propositions


  • Chiara Del Bo
  • Massimo Florio


Despite widespread privatizations over the last three decades, public enterprises, as production units under government control, are still present in several countries and sectors. While the academic and political debate on the costs and benefits of privatization is vast, a focus on the rationale for public enterprises, from the standpoint of Social Cost Benefit Analysis, is missing. This paper aims at filling this gap and provides a normative discussion on public enterprises in a general equilibrium setting. The conditions under which public provision may be beneficial and the metrics for evaluating polices and projects under (a)symmetric information and (non)benevolent governments are presented in three welfare propositions. The main policy message points to the overall quality of institutions as a necessary pre-condition for socially desirable public enterprises. A sound institutional environment provides policy-makers with the correct incentives to design and implement meaningful policies even if public administrators adopt sub-optimal plans. Institutions should constrain self-interested policy-makers from disrupting the key welfare signals for policy adoption as well as for project appraisal, while bias in management is a relatively less important concern.

Suggested Citation

  • Chiara Del Bo & Massimo Florio, 2012. "Public enterprises, planning and policy adoption: three welfare propositions," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 15(4), pages 263-279, December.
  • Handle: RePEc:taf:jpolrf:v:15:y:2012:i:4:p:263-279 DOI: 10.1080/17487870.2012.722846

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    Cited by:

    1. Mildred E. Warner, 2013. "Does local government size matter? Privatization and hybrid systems of local service delivery," Chapters,in: The Challenge of Local Government Size, chapter 11, pages 263-288 Edward Elgar Publishing.
    2. Mario BENASSI & Matteo LANDONI, 2017. "State Owned Enterprises as Knowledge Explorer Agents," Departmental Working Papers 2017-13, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
    3. Hausman, William J. & Neufeld, John L. & Schreiber, Till, 2014. "Multilateral and bilateral aid policies and trends in the allocation of electrification aid, 1970–2001," Utilities Policy, Elsevier, vol. 29(C), pages 54-62.
    4. Del Bo, Chiara D. & Ferraris, Matteo & Florio, Massimo, 2017. "Governments in the market for corporate control: Evidence from M&A deals involving state-owned enterprises," Journal of Comparative Economics, Elsevier, vol. 45(1), pages 89-109.

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