IDEAS home Printed from https://ideas.repec.org/p/mil/wpdepa/2010-20.html
   My bibliography  Save this paper

The theory of public enterprise, social welfare and planning: a note

Author

Listed:
  • Elisa BORGHI

    ()

  • Chiara DEL BO

    ()

  • Massimo FLORIO

    ()

Abstract

After reviewing the theory of social cost-benefit analysis, the paper uses it to illustrate necessary and sufficient conditions for public provision. (A)Under symmetric information and benevolent government, public provision is socially beneficial when there is a well defined public production plan for some goods, when policy and projects, i. e. changes in the production plan, are selected in such a way as to pass a social cost-benefit test at shadow prices, and production cannot be shut down for some goods. (B) Under not (fully) benevolent government, and asymmetric information, while shadow pricing rules do not change if the production plan is further distorted from the optimal one, sub-optimal policy adoption leads to inconsistency in project selection. The allocation of property rights will also be distorted, as privatization or nationalization are signals fixed by the government. Public provision and public procurement will be not equivalent, in general, while public provision can be seen as a form of public procurement. (C) If the social planner is not fully benevolent but cannot profit from policy design, still shadow prices are sufficient statistics for changes of the public plan. State-owned enterprises will be welfare superior to privately-owned enterprises if the rents of the planner are less than the rents of the POEs under procurement, and shadow prices must be used to compare the outcomes. The implication of the paper is that the rationale of public enterprises is destroyed by lack of planning and errors in corruption in policy adoption, but not by errors or corruption in production plans. This points to the overall quality of institutions as a pre-condition for socially desirable public enterprises

Suggested Citation

  • Elisa BORGHI & Chiara DEL BO & Massimo FLORIO, 2010. "The theory of public enterprise, social welfare and planning: a note," Departmental Working Papers 2010-20, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
  • Handle: RePEc:mil:wpdepa:2010-20
    as

    Download full text from publisher

    File URL: http://wp.demm.unimi.it/files/wp/2010/DEMM-2010_020wp.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Massimo Florio, 2007. "Introduction: Multi-government Cost–Benefit Analysis, Shadow Prices and Incentives," Chapters,in: Cost–Benefit Analysis and Incentives in Evaluation, chapter 1 Edward Elgar Publishing.
    2. Willner, Johan, 2006. "Privatisation and liberalisation in an industry with network externalities," Economics Letters, Elsevier, vol. 91(2), pages 197-203, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Juan-Pierré BRUWER & André VAN DEN BERG, 2017. "The conduciveness of the South African economic environment and Small, Medium and Micro Enterprise sustainability: A literature review," Expert Journal of Business and Management, Sprint Investify, vol. 5(1), pages 1-12.
    2. Mildred E. Warner, 2011. "Club Goods and Local Government," Journal of the American Planning Association, Taylor & Francis Journals, vol. 77(2), pages 155-166, April.

    More about this item

    Keywords

    Cost Benefit Analysis; Publicly provided goods; Social welfare;

    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • H4 - Public Economics - - Publicly Provided Goods
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mil:wpdepa:2010-20. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (DEMM Working Papers). General contact details of provider: http://edirc.repec.org/data/damilit.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.