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Privatization and X-Inefficiency: A Bargaining Approach


  • Haskel, Jonathan
  • Sanchis, Amparo


The usual analysis of privatization and X-inefficiency uses agency theory to model managerial effort. We model worker effort as determined by a bargain between firms and workers. Workers dislike effort because it lowers utility. Firms prefer high effort because it raises productivity. Public-sector firms are assumed to be social welfare maximizers and compared to private-sector firms, therefore, they bargain lower effort levels since they have the interests of consumers and workers at heart. Our model predicts that under certain conditions privatization should raise effort and so lower X-inefficiency, and that wages may increase or decrease.

Suggested Citation

  • Haskel, Jonathan & Sanchis, Amparo, 1995. "Privatization and X-Inefficiency: A Bargaining Approach," CEPR Discussion Papers 1192, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:1192

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    References listed on IDEAS

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    More about this item


    Bargaining; Privatization; X-inefficiency;

    JEL classification:

    • J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out


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