Privatization in competitive sectors: the record to date

Sunita Kikeri and John Nellis

No 2860, Policy Research Working Paper Series from The World Bank

Abstract: The paper reviews recent evidence on the impact of privatization. It focuses on traditional privatization efforts involving firms in competitive markets. It shows that privatization improves firms'financial and operating performance, yields positive fiscal and macroeconomic benefits (proceeds are saved rather than spent, transfers decline, and governments start collecting taxes from privatized firms), and improves overall welfare. The popular view that privatization always leads to layoffs is unfounded. While highly protected firms have seen significant declines in net employment, competitive firms generally experienced slight declines if any. Privatization's effects on wealth and income distribution have only recently been receiving the attention of analysts, and research is just getting underway. The paper highlights the conditions for successful privatization: strong political commitment combined with wider public understanding of and support for the process; creation of competitive markets through removal of entry and exit barriers, financial sector reforms that create commercially oriented banking systems, effective regulatory frameworks that reinforce the benefits of private ownership; transparency in the privatization process; and measures to mitigate adverse social and environmental effects.

Keywords: Banks&Banking Reform; Non Bank Financial Institutions; Municipal Financial Management; Financial Crisis Management&Restructuring; Trade Finance and Investment; Municipal Financial Management; Financial Crisis Management&Restructuring; Non Bank Financial Institutions; Economic Systems; Banks&Banking Reform (search for similar items in EconPapers)
Date: 2002-06-30
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (22)

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