Privatization Incentives – A Wage Bargaining Approach

Andreas Kuhlmann

No 18, ifo Working Paper Series from ifo Institute - Leibniz Institute for Economic Research at the University of Munich

Abstract: We analyze the incentives of a government to privatize a state owned firm. Assuming price cap regulation, a unionized labor market and wage bargaining the government’s gains from privatization depend on two effects. While the government looses control over the firm’s investment and employment decisions, the union’s bargaining position can be weakened by privatization. Since price cap regulation tends to increase the wage under privatization, the government’s incentives to privatize are low if the union’s bargaining power is high. Considering different kinds of in-vestments does not change this result qualitatively.

JEL-codes: H32 L32 L33 (search for similar items in EconPapers)
Date: 2005
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Citations: View citations in EconPapers (1)

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