Notes on the Bases for Government Intervention through Public Enterprises

Benjamin Diokno
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Benjamin Diokno: School of Economics, University of the Philippines Diliman

No 198601, UP School of Economics Discussion Papers from University of the Philippines School of Economics

Abstract: This paper argues that the rationale for public enterprises flows from the general discussion on the justification for state intervention. Within a welfare theoretic framework, it argues that the wide range of stated motives for using the public enterprise form can in most cases be attributed to some violations of efficiency conditions. It has been shown that in the Philippines a great majority of a state firms can be justified on such grounds. Still, numerous firms were established on the basis of some noneconomic grounds. The use of the latter set of justifications resulted in government intervention even in areas where competitive market works, thereby unjustifiably enlarging the scope of public sector activity.

Date: 1986-01
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Published as UPSE Discussion Paper No. DP 1986-01, January 1986

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