The Economic Theory of Privatization


in The Challenges of Privatization

Published in print March 2004 | ISBN: 9780199249343
Published online April 2004 | e-ISBN: 9780191600845 | DOI:
 The Economic Theory of Privatization

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This chapter presents a concise survey of the economic literature of privatization providing the theoretical backing for the empirical analyses carried out in the book. The chapter shows why private or public ownership may matter in the behavior of firms. Then it surveys the main results of the political economy approach to privatization, taking into account political preferences and government constraints. Finally, it analyzes the optimal privatization method in order to achieve the various economic and political objectives.

Keywords: allocative and productive efficiency; costs and benefits of privatization; incomplete contracts; irreversibility; nationalization; neutrality theorems; political economics; privatization methods; privatization theory

Chapter.  7426 words. 

Subjects: Financial Markets

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