Corruption and Positive Selection in Privatization

Raluca E. Buia () and M. Cristina Molinari
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Raluca E. Buia: Advanced School of Economics, University Of Venice C� Foscari

No 2008_43, Working Papers from Department of Economics, University of Venice "Ca' Foscari"

Abstract: We consider the supply of a public good based on a publicly-owned facility. The Government has a choice between provision in-house and privatizing the facility and then outsourcing the production. In particular, we focus on corruption in the decision to privatize and on its effect on social welfare when there is asymmetric information on the public and private manager's efficiency. Our analysis shows that a corrupt Government, that chooses to privatize only in exchange for a bribe, makes a positive selection on the private firm's efficiency and, thus, may raise expected social welfare above what an honest Government could get.

Keywords: Corruption; Privatization; Private vs. public provision. (search for similar items in EconPapers)
JEL-codes: D73 H44 K42 L33 (search for similar items in EconPapers)
Pages: 17
Date: 2008
New Economics Papers: this item is included in nep-cta and nep-law
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Corruption and positive selection in privatization (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:ven:wpaper:2008_43

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