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Political Environment and Privatization Prices


  • Alberto Chong


  • Alejandro Riaño


This paper studies the link between the political and institutional context and privatization sales prices. The latter serves as a measure for assessing the relative performance of the privatization goals. Whereas this link has been studied theoretically, there are very few, if any, empirical papers on this relationship. Using data from 308 privatizations around the world and applying a cross-country approach (including instrumental variables), we find that, while the overall political regime does not matter much for prices, the political processes beyond the basic regime do matter. Institutional context also produces a significant impact on prices. Both results are robust to changes in specification.

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  • Alberto Chong & Alejandro Riaño, 2006. "Political Environment and Privatization Prices," Research Department Publications 4439, Inter-American Development Bank, Research Department.
  • Handle: RePEc:idb:wpaper:4439

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    1. Chong, Alberto & Lopez-de-Silanes, Florencio, 2002. "Privatization and labor force restructuring around the world," Policy Research Working Paper Series 2884, The World Bank.
    2. Bel, Germà & Trillas, Francesc, 2005. "Privatization, corporate control and regulatory reform: the case of Telefonica," Telecommunications Policy, Elsevier, vol. 29(1), pages 25-51, February.
    3. Roubini, Nouriel & Sachs, Jeffrey D., 1989. "Political and economic determinants of budget deficits in the industrial democracies," European Economic Review, Elsevier, vol. 33(5), pages 903-933, May.
    4. Alberto Chong & Luisa Zanforlin, 2004. "Inward-Looking Policies, Institutions, Autocrats, and Economic Growth in Latin America: An Empirical Exploration," Public Choice, Springer, vol. 121(3), pages 335-361, February.
    5. Stephen Knack & Philip Keefer, 1995. "Institutions And Economic Performance: Cross-Country Tests Using Alternative Institutional Measures," Economics and Politics, Wiley Blackwell, vol. 7(3), pages 207-227, November.
    6. Alberto Chong & Virgilio Galdo, 2006. "Streamlining and Privatization Prices in the Telecommunications Industry," Economica, London School of Economics and Political Science, vol. 73(291), pages 461-484, August.
    7. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1998. "Law and Finance," Journal of Political Economy, University of Chicago Press, vol. 106(6), pages 1113-1155, December.
    8. Beck, Thorsten & Clarke, George & Groff, Alberto & Keefer, Philip & Walsh, Patrick, 2000. "New tools and new tests in comparative political economy - the database of political institutions," Policy Research Working Paper Series 2283, The World Bank.
    9. Perotti, Enrico C. & van Oijen, Pieter, 2001. "Privatization, political risk and stock market development in emerging economies," Journal of International Money and Finance, Elsevier, vol. 20(1), pages 43-69, February.
    10. Bruno Biais & Enrico Perotti, 2002. "Machiavellian Privatization," American Economic Review, American Economic Association, vol. 92(1), pages 240-258, March.
    11. Perotti, Enrico C, 1995. "Credible Privatization," American Economic Review, American Economic Association, vol. 85(4), pages 847-859, September.
    12. W. J. Henisz, 2000. "The Institutional Environment for Economic Growth," Economics and Politics, Wiley Blackwell, vol. 12(1), pages 1-31, March.
    13. Bortolotti, Bernardo & Fantini, Marcella & Siniscalco, Domenico, 2004. "Privatisation around the world: evidence from panel data," Journal of Public Economics, Elsevier, vol. 88(1-2), pages 305-332, January.
    14. Kerim Peren Arin & Cagla Okten, 2003. "The determinants of privatization prices: evidence from Turkey," Applied Economics, Taylor & Francis Journals, vol. 35(12), pages 1393-1404.
    15. repec:hrv:faseco:30727606 is not listed on IDEAS
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