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Infrastructure and Public Utilities Privatization in Developing Countries

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  • Auriol, Emmanuelle
  • Picard, Pierre M

Abstract

The paper analyses governments’ trade-off between fiscal benefits and consumer surplus in privatization reforms of noncompetitive industries in developing countries. Under privatization, the control rights are transferred to private interests so that public subsidies decline. This benefit for tax-payers comes at the cost of price increases for consumers. In developing countries, tight budget constraints imply that privatization may be optimal for low profitability segments. For highly profitable public utilities, the combination of allocative inefficiency and critical budgetary conditions may favour public ownership. Finally, once a market segment gives room for more than one firm, governments prefer to regulate the industry. In the absence of a credible regulatory agency, regulation is achieved through public ownership.

Suggested Citation

  • Auriol, Emmanuelle & Picard, Pierre M, 2006. "Infrastructure and Public Utilities Privatization in Developing Countries," CEPR Discussion Papers 6018, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:6018
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    Citations

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    Cited by:

    1. Auriol, Emmanuelle & Picard, Pierre M., 2013. "A theory of BOT concession contracts," Journal of Economic Behavior & Organization, Elsevier, vol. 89(C), pages 187-209.
    2. Dan Bogart & Latika Chaudhary, 2012. "Regulation, Ownership, and Costs: A Historical Perspective from Indian Railways," American Economic Journal: Economic Policy, American Economic Association, vol. 4(1), pages 28-57, February.
    3. Emmanuelle Auriol & Sara Biancini, 2015. "Powering Up Developing Countries through Integration?," World Bank Economic Review, World Bank Group, vol. 29(1), pages 1-40.
    4. Bogart, Dan & Chaudhary, Latika, 2015. "Off the rails: Is state ownership bad for productivity?," Journal of Comparative Economics, Elsevier, vol. 43(4), pages 997-1013.
    5. Sara Biancini, 2010. "Incomplete Regulation, Competition, and Entry in Increasing Returns to Scale Industries," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 12(6), pages 1003-1026, December.
    6. González, Paula & Macho-Stadler, Inés, 2013. "A theoretical approach to dual practice regulations in the health sector," Journal of Health Economics, Elsevier, vol. 32(1), pages 66-87.
    7. Auriol, Emmanuelle & Biancini, Sara, 2009. "Economic Integration and Investment Incentives in Regulated Industries," TSE Working Papers 09-039, Toulouse School of Economics (TSE).
    8. Antonio Estache & L. Wren-Lewis, 2008. "Towards a Theory of Regulation for Developing Countries: Following Laffont's Lead," Working Papers ECARES 2008_018, ULB -- Universite Libre de Bruxelles.
    9. Haldun Evrenk & E. Zenginobuz, 2010. "Regulation through a revenue contest," Journal of Economics, Springer, vol. 99(3), pages 211-237, April.
    10. Razvan Catalin DOBREA & Nadia CIOCOIU & Stelian TIPA, 2010. "Investments characteristics in infrastructure industry," Economia. Seria Management, Faculty of Management, Academy of Economic Studies, Bucharest, Romania, vol. 13(1), pages 204-210, June.
    11. Antonio Estache & Liam Wren-Lewis, 2009. "Toward a Theory of Regulation for Developing Countries: Following Jean-Jacques Laffont's Lead," Journal of Economic Literature, American Economic Association, vol. 47(3), pages 729-770, September.
    12. Pierre M. Picard & Ridwan D. Rusli, 2012. "State Owned Firms: Private Debt, Cost Revelation and Welfare," CREA Discussion Paper Series 12-10, Center for Research in Economic Analysis, University of Luxembourg.
    13. repec:eee:juipol:v:50:y:2018:i:c:p:153-163 is not listed on IDEAS

    More about this item

    Keywords

    developing countries; government budget constraint; infrastructure; privatization; public utilities; regulation;

    JEL classification:

    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
    • L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation

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