Does Inefficiency Justify Privatization? The Case of Intermediate Industry Monopolies
We use an infinitely lived agent model in which an intermediate good is provided either by a public or a private monopolist to study the effects of privatization on steady state levels of income. We allow for public sector inefficiencies(x-inefficiency) which shift down the intermediate goods technology as well as bureaucratic inefficiencies which decrease the amount of tax revenue which will actually be allocated to public investment. We solve the model numerically for reasonable parameter values. The results of the model indicate that the benefits of this type of privatizations depend crucially on the size of the relative inefficiency of public firms and the amount of public investment. Furthermore, the gains from privatization are found to be strongly related to the balance sheet of the public firm that is privatized. Privatization of public firms which run deficits (surpluses) typically generate increases (decreases) in steady state consumption.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- SchmitzJr, James A., 2001.
"Government production of investment goods and aggregate labor productivity,"
Journal of Monetary Economics,
Elsevier, vol. 47(1), pages 163-187, February.
- James A. Schmitz, 1997. "Government production of investment goods and aggregate labor productivity," Staff Report 240, Federal Reserve Bank of Minneapolis.
- 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.
- Gylfason, Thorvaldur & Herbertsson, Tryggvi Thor & Zoega, Gylfi, 1998. "Ownership and Growth," CEPR Discussion Papers 1900, C.E.P.R. Discussion Papers.
- Philippe Aghion & Olivier J. Blanchard, 1994.
"On the Speed of Transition in Central Europe,"
in: NBER Macroeconomics Annual 1994, Volume 9, pages 283-330
National Bureau of Economic Research, Inc.
- Aghion, P. & Blanchard, O.J., 1993. "On the Speed of Transition in Central Europe," Working papers 93-8, Massachusetts Institute of Technology (MIT), Department of Economics.
- Blanchard, Olivier Jean & Aghion, Philippe, 1994. "On the Speed of Transition in Central Europe," Scholarly Articles 4481322, Harvard University Department of Economics.
- John Vickers & George Yarrow, 1991. "Economic Perspectives on Privatization," Journal of Economic Perspectives, American Economic Association, vol. 5(2), pages 111-132, Spring.
- Alexeev, Michael & Kaganovich, Michael, 2001. "Dynamics of Privatization under a Subsistence Constraint," Journal of Comparative Economics, Elsevier, vol. 29(3), pages 417-447, September.
- Gerhard Glomm & Fabio Mendez, 2009. "Privatization, Deregulation, and Capital Accumulation," Southern Economic Journal, Southern Economic Association, vol. 75(4), pages 976-995, April.
- Castanheira, Micael & Roland, Gérard, 1996.
"The Optimal Speed of Transition: A General Equilibrium Analysis,"
CEPR Discussion Papers
1442, C.E.P.R. Discussion Papers.
- Castanheira, Micael & Roland, Gerard, 2000. "The Optimal Speed of Transition: A General Equilibrium Analysis," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 41(1), pages 219-39, February.
- Micael Castanheira De Moura & Gérard Roland, 2000. "The optimal speed of transition: a general equilibrium analysis," ULB Institutional Repository 2013/10011, ULB -- Universite Libre de Bruxelles.
- Rafael La Porta & Florencio López-de-Silanes, 1999. "The Benefits of Privatization: Evidence from Mexico," The Quarterly Journal of Economics, Oxford University Press, vol. 114(4), pages 1193-1242.
- Douglas Gollin, 2001.
"Getting Income Shares Right,"
Department of Economics Working Papers
2001-11, Department of Economics, Williams College.
When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpma:0507024. 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: (EconWPA)
If references are entirely missing, you can add them using this form.