The Truth about Privatization in Latin America

Florencio Lopez-de-Silanes () and Alberto Chong ()

Yale School of Management Working Papers from Yale School of Management

Abstract: Privatization is under attack. Criticisms run from corrupt deals to abuse of market power and social welfare losses. We evaluate the empirical record on privatization relying on recent comprehensive studies from Latin America. There are four main results. First, the increased profitability of privatized firms is not explained by sample selection biases. Second, in the quest to identify the sources of increased profitability after privatization, we find little evidence that validates concerns of generalized market power abuses, exploitation of workers and lack of fiscal benefits. Third, the manner in which privatization is carried out matters. Transparencies and homogeneity in procedures, speed, and limited restructuring prior to privatization lead to better outcomes and less room for curruption and discretion. Finally, privatization's success is enhanced by two complementary policies: re-regulation or deregulation of industries previously shielded from competitive forces; and an effective corporate governance framework that facilitates privatized firms' access to capital at lower costs. Overall, the empirical record shows that privatization leads to increased profitability and productivity, firm restructuring, fiscal benefits, output growth and even quality improvements. Most cases of privatization failure can be linked to poor contract design, opaque processes with heavy state involvement, lack of re-regulation and a poor corporate governance framework.

New Economics Papers: this item is included in nep-his
Date: Written
View citations in EconPapers

Downloads: (external link)
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=464460 (application/pdf)

Related works:
Working Paper: The Truth About Privatization in Latin America (2003)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:ysm:somwrk:ysm436

Access Statistics for this paper

More papers in Yale School of Management Working Papers from Yale School of Management
Contact information at EDIRC.
Series data maintained by ().