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The distributional impact of privatization in developing countries: the role of democratic institutions

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  • Lidia CERIANI
  • Simona SCABROSETTI

Abstract

Focusing on developing countries which have recently experienced political and economic transitions, we study how income inequality is affected by privatization in the light of the democratization process. We find that privatization is negatively and significantly correlated with the inequality in the income distribution when, thanks to democratic institutions, the protection of the civil liberties and the guarantee of the political rights are widely ensured to all citizens. In fact, privatization generates revenue which well mature democracies can use to satisfy the redistributive pressures from the poor. Then, our evidence suggests an interesting policy implication for developing countries: only after having established mature representative political institutions, privatization can be implemented without producing a negative distributional impact.

Suggested Citation

  • Lidia CERIANI & Simona SCABROSETTI, 2011. "The distributional impact of privatization in developing countries: the role of democratic institutions," Departmental Working Papers 2011-31, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
  • Handle: RePEc:mil:wpdepa:2011-31
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    1. Badru Bukenya & Pablo Yanguas, 2013. "Building state capacity for inclusive development. The politics of public sector reform," Global Development Institute Working Paper Series esid-025-13, GDI, The University of Manchester.

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    More about this item

    Keywords

    Gastil index; civil liberties; political rights; Gini index;
    All these keywords.

    JEL classification:

    • D30 - Microeconomics - - Distribution - - - General
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • P16 - Economic Systems - - Capitalist Systems - - - Political Economy of Capitalism
    • P35 - Economic Systems - - Socialist Institutions and Their Transitions - - - Public Finance
    • P36 - Economic Systems - - Socialist Institutions and Their Transitions - - - Consumer Economics; Health; Education and Training; Welfare, Income, Wealth, and Poverty
    • P50 - Economic Systems - - Comparative Economic Systems - - - General

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