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Privatization Incentives - A Wage Bargaining Approach


  • Andreas Kuhlmann


We analyze the incentives of a government to privatize a state owned firm. Assuming price cap regulation, a unionized labor market and wage bargaining the government’s gains from privatization depend on two effects. While the government looses control over the firm’s investment and employment decisions, the union’s bargaining position can be weakened by privatization. Since price cap regulation tends to increase the wage under privatization, the government’s incentives to privatize are low if the union’s bargaining power is high. Considering different kinds of in-vestments does not change this result qualitatively.

Suggested Citation

  • Andreas Kuhlmann, 2005. "Privatization Incentives - A Wage Bargaining Approach," ifo Working Paper Series 18, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
  • Handle: RePEc:ces:ifowps:_18

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    References listed on IDEAS

    1. Kira Boerner, 2004. "The Political Economy of Privatization: Why Do Governments Want Reforms?," Working Papers 2004.106, Fondazione Eni Enrico Mattei.
    2. Bernardo Bortolotti & Paolo Pinotti, 2003. "The Political Economy of Privatization," Working Papers 2003.45, Fondazione Eni Enrico Mattei.
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    More about this item


    Wage bargaining regulation privatization;

    JEL classification:

    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
    • L32 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Public Enterprises; Public-Private Enterprises
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out


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