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Privatization, Efficiency and Economic Growth


  • Gylfason, Thorvaldur


Privatization is shown to increase national economic output in a two-sector full-employment general-equilibrium model by enhancing efficiency as if a relative price distortion were being removed through price reform, trade liberalization, or stabilization. The static output gain from reallocation and reorganization through privatization is captured in a simple formula in which the gain is a quadratic function of the original distortion stemming from an excessive public sector. Substitution of plausible parameter values into the formula indicates that, in practice, the static output gain from privatization may be large. The potential dynamic output gain from privatization also appears to be substantial.

Suggested Citation

  • Gylfason, Thorvaldur, 1998. "Privatization, Efficiency and Economic Growth," CEPR Discussion Papers 1844, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:1844

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    References listed on IDEAS

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    Cited by:

    1. Emanuele Bacchiocchi & Massimo Florio, 2008. "Privatisation and aggregate output: testing for macroeconomic transmission channels," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 35(5), pages 525-545, December.

    More about this item


    Economic Growth; Efficiency; Privatization;

    JEL classification:

    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • P11 - Economic Systems - - Capitalist Systems - - - Planning, Coordination, and Reform


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