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Privatization Incentives – A Wage Bargaining Approach

  • Andreas Kuhlmann
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    We analyze the incentives of a government to privatize a state owned firm. Assumingprice cap regulation, a unionized labor market and wage bargaining the government’sgains from privatization depend on two effects. While the government looses controlover the firm’s investment and employment decisions, the union’s bargaining positioncan 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.

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    File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-Ifo_Working_Papers/wp-ifo-2005-2010/IfoWorkingPaper-18.pdf
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    Paper provided by Ifo Institute for Economic Research at the University of Munich in its series Ifo Working Paper Series with number Ifo Working Papers No. 18.

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    Date of creation: 2005
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    Handle: RePEc:ces:ifowps:_18
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    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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