Infrastructure and Public Utilities Privatization in Developing Countries

Emmanuelle Auriol () and Pierre M. Picard ()

No 6018, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: The paper analyses governments’ trade-off between fiscal benefits and consumer surplus in privatization reforms of noncompetitive industries in developing countries. Under privatization, the control rights are transferred to private interests so that public subsidies decline. This benefit for tax-payers comes at the cost of price increases for consumers. In developing countries, tight budget constraints imply that privatization may be optimal for low profitability segments. For highly profitable public utilities, the combination of allocative inefficiency and critical budgetary conditions may favour public ownership. Finally, once a market segment gives room for more than one firm, governments prefer to regulate the industry. In the absence of a credible regulatory agency, regulation is achieved through public ownership.

Keywords: developing countries; government budget constraint; infrastructure; privatization; public utilities; regulation (search for similar items in EconPapers)
JEL-codes: H54 L33 L43 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cse, nep-ene, nep-pbe and nep-reg
Date: 2006-12
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Related works:
Working Paper: Infrastructure and public utilities privatization in developing countries (2006)
Journal Article: Infrastructure and Public Utilities Privatization in Developing Countries (2008)
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