ENDOWING CITIZENS WITH A PORTFOLIO OF STATE-SPONSORED ENTERPRISES FOR EFFICIENT AND EQUITABLE PRIVATIZATION

William Hartnett

No 4252-02, Working papers from Massachusetts Institute of Technology (MIT), Sloan School of Management

Abstract: This paper discusses a portfolio endowment policy as an alternative to conventional privatization policies. The portfolio endowment policy endows each citizen with a financial instrument representing a portfolio of state-sponsored enterprises. The policy is analyzed in terms of efficiency and fairness. Potential efficiency advantages include easier logistics (since the endowments are automatic) and financial diversification (due to the portfolio effect), although specific cases where the policy is not a theoretical optimum are demonstrated. Fairness results from equality of opportunity for all citizens, avoiding the worsening inequality and public opposition associated with conventional privatization policies. Feasibility is also addressed, including effective corporate governance for a wide shareholder base. This policy analysis demonstrates that the portfolio endowment policy is feasible, with important potential benefits, and merits serious consideration. It concludes with a topical application in the Mideast relevant to international peace and secu

Keywords: Privatization; portfolio endowment; citizenry; efficiency; diversification; utility theory; information theory; equity; inequality; fairness; corporate governance; employee remuneration; stock options; South Africa; Mideast; Public support (search for similar items in EconPapers)
Date: 2003-03-28
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