The Political Economy of Privatization: Why Do Governments Want Reforms?

Kira Boerner

No 2004.106, Working Papers from Fondazione Eni Enrico Mattei

Abstract: International organizations promote privatization as precondition for economic development. But is there really too little privatization? This political economy model asks for the incentives of governments to privatize or restructure a state-owned firm. Different government types are compared to identify the political and institutional determinants of privatization. Under privatization, governments commit not to in influence the profit-maximizing employment choice by private investors. With respect to the social optimum, both voter-oriented and egoistic governments can have inefficiently high incentives to privatize. When this is the case, outside pressure to privatize is detrimental. An improving institutional environment reduces these inefficiencies.

Keywords: Political incentives; Privatization; Restructuring; Employment (search for similar items in EconPapers)
JEL-codes: D72 D73 H82 L33 (search for similar items in EconPapers)
Date: 2004-07
New Economics Papers: this item is included in nep-pol and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:fem:femwpa:2004.106

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