Chicken or Egg. Which Should Come First, Privatisation or Liberalisation?

Gianni De Fraja

Annals of Economics and Statistics, 1994, issue 33, 133-156

Abstract: This paper identifies an industrial policy instrument in the timing of privatisation, relative to the timing of liberalisation of a public firm's market, defined as the lifting of legal barriers to entry by other firms. It is shown that the long run market competitiveness and the privatised firm efficiency are highly sensitive to this decision, and that the choice whether privatisation should precede liberalisation or vice versa depends on the government's preferences and on the relationship between competitive pressure and cost efficiency of the privatised firm. We identify conditions under which the case in which liberalisation preceeding privatisation Pareto dominates the opposite timing.

Date: 1994
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Persistent link: https://EconPapers.repec.org/RePEc:adr:anecst:y:1994:i:33:p:133-156

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