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State ownership - a residual role?

  • Perotti, Enrico

The author reviews the state of thinking on the governance role of state ownership. He argues that a gradual transfer of operational control and financial claims over state assets remains the most desirable goal, but it needs to be paced to avoid regulatory capture, and the capture of the privatization process itself. In addition, the speed of transfer should be timed on the progress in developing a strong regulatory governance system, to which certain residual rights of intervention must be vested. In many countries institutional weakness limits regulatory capacity and reliability, yet the author's conclusion is that in such environments, maintaining state control undermines the very emergence of institutional capacity, and so the balance should tip toward progressively less direct state control. After all, what are"institutions"if not governance mechanisms with some degree of autonomy from both political and private interests? The gradual creation of institutions partially autonomous from political power must become central to the development of an optimal mode of regulatory governance. The author offers some suggestions about creating maximum accountability in regulatory governance, in particular creating an internal control system based on a rotating board representative of users, producers, and civic organizations, to be elected by a process involving frequent reporting and disclosure.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 3407.

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Date of creation: 01 Sep 2004
Date of revision:
Handle: RePEc:wbk:wbrwps:3407
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  10. Oliver Hart, 2002. "Incomplete Contracts and Public Ownership: Remarks, and an Application to Public-Private Partnerships," The Centre for Market and Public Organisation 02/061, Department of Economics, University of Bristol, UK.
  11. Enrico Perotti, 2001. "Lessons from the Russian Meltdown: The Economics of Soft Legal Constraints," William Davidson Institute Working Papers Series 379, William Davidson Institute at the University of Michigan.
  12. Jihua Che, 2002. "Rent Seeking and Government Ownership of Firms: An Application to China’s Township-Village Enterprises," William Davidson Institute Working Papers Series 497, William Davidson Institute at the University of Michigan.
  13. Andrei Shleifer, 1998. "State Versus Private Ownership," NBER Working Papers 6665, National Bureau of Economic Research, Inc.
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  15. 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, January.
  16. Nellis, J., 1999. "Time to Rethink Privatization in Transition Economies?," Papers 38, World Bank - International Finance Corporation.
  17. Boycko, Maxim & Shleifer, Andrei & Vishny, Robert W, 1996. "A Theory of Privatisation," Economic Journal, Royal Economic Society, vol. 106(435), pages 309-19, March.
  18. David E. M. Sappington & Joseph E. Stiglitz, 1987. "Privatization, information and incentives," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 6(4), pages 567-585.
  19. Schmidt, Klaus M., 1996. "The costs and benefits of privatization: An incomplete contracts approach," Munich Reprints in Economics 19773, University of Munich, Department of Economics.
  20. Hart, Oliver, 1995. "Corporate Governance: Some Theory and Implications," Economic Journal, Royal Economic Society, vol. 105(430), pages 678-89, May.
  21. Laeven, Luc & Perotti, Enrico C, 2001. "Confidence Building in Emerging Stock Markets," CEPR Discussion Papers 3055, C.E.P.R. Discussion Papers.
  22. Perotti, Enrico C, 1995. "Credible Privatization," American Economic Review, American Economic Association, vol. 85(4), pages 847-59, September.
  23. John Nellis, 2003. "Privatization in Africa: What has Happened? What is to be Done?," Working Papers 25, Center for Global Development.
  24. Megginson, William L & Nash, Robert C & van Randenborgh, Matthias, 1994. " The Financial and Operating Performance of Newly Privatized Firms: An International Empirical Analysis," Journal of Finance, American Finance Association, vol. 49(2), pages 403-52, June.
  25. Shleifer, Andrei & Vishny, Robert W, 1994. "Politicians and Firms," The Quarterly Journal of Economics, MIT Press, vol. 109(4), pages 995-1025, November.
  26. Enrico C Perotti, 1994. "A taxonomy of post-socialist financial systems: decentralized enforcement and the creation of inside money," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 2(1), pages 71-81, 03.
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