Corruption and positive selection in privatization

Raluca E. Buia and M. Cristina Molinari

Research in Economics, 2012, vol. 66, issue 4, 297-304

Abstract: We consider the supply of a public good based on a publicly owned facility. The Government has a choice between provision in-house and privatizing the facility and then outsourcing the production. In particular, we focus on corruption in the decision to privatize and on its effect on social welfare when there is asymmetric information on the public and private manager's efficiency. Our analysis shows that a corrupt Government, that chooses to privatize only in exchange for a bribe, makes a positive selection on the private firm's efficiency and, thus, may have a positive effect on social welfare.

Keywords: Corruption; Privatization; Private versus public provision (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reecon:v:66:y:2012:i:4:p:297-304

DOI: 10.1016/j.rie.2012.05.002

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