Privatization Incentives – A Wage Bargaining Approach

Andreas Kuhlmann

No Ifo Working Papers No. 18, Ifo Working Paper Series from Ifo Institute for Economic Research at the University of Munich

Abstract: We analyze the incentives of a government to privatize a state owned firm. Assumingprice cap regulation, a unionized labor market and wage bargaining the government’sgains from privatization depend on two effects. While the government looses controlover the firm’s investment and employment decisions, the union’s bargaining positioncan be weakened by privatization. Since price cap regulation tends to increase the wage under privatization, the government’s incentives to privatize are low if the union’s bargaining power is high. Considering different kinds of in-vestments does not change this result qualitatively.

Keywords: Wage; bargainingregulationprivatization (search for similar items in EconPapers)
JEL-codes: H32 L32 L33 (search for similar items in EconPapers)
Date: Written

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