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

Listed author(s):
  • Lidia CERIANI

    ()

  • Simona SCABROSETTI

    ()

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.

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File URL: http://wp.demm.unimi.it/files/wp/2011/DEMM-2011_031wp.pdf
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Paper provided by Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano in its series Departmental Working Papers with number 2011-31.

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Date of creation: 30 Nov 2011
Handle: RePEc:mil:wpdepa:2011-31
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  1. Torsten Persson & Guido Tabellini, 2007. "The growth effect of democracy: Is it heterogenous and how can it be estimated?," Working Papers 322, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  2. Sonja Opper, 2004. "The Political Economy of Privatization: Empirical Evidence from Transition Economies," Kyklos, Wiley Blackwell, vol. 57(4), pages 559-586, November.
  3. Birdsall, Nancy & Nellis, John, 2003. "Winners and Losers: Assessing the Distributional Impact of Privatization," World Development, Elsevier, vol. 31(10), pages 1617-1633, October.
  4. Chi-Chur Chao & Bharat Hazari & Eden Yu, 2006. "Rising wage inequality in developing economies: Privatization and competition," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 15(3), pages 375-385.
  5. Alberto Cavaliere & Simona Scabrosetti, 2008. "Privatization And Efficiency: From Principals And Agents To Political Economy," Journal of Economic Surveys, Wiley Blackwell, vol. 22(4), pages 685-710, September.
  6. Profeta, Paola & Puglisi, Riccardo & Scabrosetti, Simona, 2013. "Does democracy affect taxation and government spending? Evidence from developing countries," Journal of Comparative Economics, Elsevier, vol. 41(3), pages 684-718.
  7. David McKenzie & Dilip Mookherjee, 2003. "The Distributive Impact of Privatization in Latin America: Evidence from Four Countries," ECONOMIA JOURNAL OF THE LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION, ECONOMIA JOURNAL OF THE LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION, vol. 0(Spring 20), pages 161-234, January.
  8. Meltzer, Allan H & Richard, Scott F, 1981. "A Rational Theory of the Size of Government," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 914-927, October.
  9. Paul Cook & Colin Kirkpatrick, 1997. "POLICY ARENA: Privatization and Public Enterprise Reform in Developing Countries: the World Bank's Bureaucrats in Business Report. Introduction and Overview," Journal of International Development, John Wiley & Sons, Ltd., vol. 9(6), pages 843-847.
  10. Acemoglu,Daron & Robinson,James A., 2009. "Economic Origins of Dictatorship and Democracy," Cambridge Books, Cambridge University Press, number 9780521671422.
  11. Tatu Vanhanen, 2000. "A New Dataset for Measuring Democracy, 1810-1998," Journal of Peace Research, Peace Research Institute Oslo, vol. 37(2), pages 251-265, March.
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