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The privatization-corruption relationship is nonlinear: Evidence from 1985-2022 data on telecommunications in 103 countries

Author

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  • Gasmi, Farid
  • Berté, Isacco
  • Demoury, Louise
  • Kouakou, Dorgyles
  • Patzig, Niklas
  • Recuero Virto, Laura

Abstract

Using data on telecommunications from 1985 to 2022 in 103 countries, this article provides evidence of a robust nonlinear relationship between privatization and corruption showing that the latter has an inverted U-shape effect on the former. Using the Bayesian Corruption Index as a proxy for corruption, we find that the threshold beyond which higher levels of corruption do no longer foster privatization is slightly above 50% of the maximum value of this index. The complexity of the relationship between privatization and corruption points to the need to develop sophisticated strategies to effectively combat corruption, the negative effects of which on social welfare have been widely discussed in the literature.

Suggested Citation

  • Gasmi, Farid & Berté, Isacco & Demoury, Louise & Kouakou, Dorgyles & Patzig, Niklas & Recuero Virto, Laura, 2024. "The privatization-corruption relationship is nonlinear: Evidence from 1985-2022 data on telecommunications in 103 countries," TSE Working Papers 24-1523, Toulouse School of Economics (TSE).
    • Handle: RePEc:tse:wpaper:129283
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    Keywords

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    JEL classification:

    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications

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