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Endowing Citizens With A Portfolio Of State-Sponsored Enterprises For Efficient And Equitable Privatization

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Author Info
Hartnett, William
Abstract

This paper discusses a portfolio endowment policy as an alternative to conventional privatization policies. The portfolio endowment policy endows each citizen with a financial instrument representing a portfolio of state-sponsored enterprises. The policy is analyzed in terms of efficiency and fairness. Potential efficiency advantages include easier logistics (since the endowments are automatic) and financial diversification (due to the portfolio effect), although specific cases where the policy is not a theoretical optimum are demonstrated. Fairness results from equality of opportunity for all citizens, avoiding the worsening inequality and public opposition associated with conventional privatization policies. Feasibility is also addressed, including effective corporate governance for a wide shareholder base. This policy analysis demonstrates that the portfolio endowment policy is feasible, with important potential benefits, and merits serious consideration. It concludes with a topical application in the Mideast relevant to international peace and secu

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File URL: http://hdl.handle.net/1721.1/1847
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Publisher Info
Paper provided by Massachusetts Institute of Technology (MIT), Sloan School of Management in its series Working papers with number 4252-02.

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Date of creation: 28 Mar 2003
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Handle: RePEc:mit:sloanp:1847

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Postal: MASSACHUSETTS INSTITUTE OF TECHNOLOGY (MIT), SLOAN SCHOOL OF MANAGEMENT, 50 MEMORIAL DRIVE CAMBRIDGE MASSACHUSETTS 02142 USA
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Postal: MASSACHUSETTS INSTITUTE OF TECHNOLOGY (MIT), SLOAN SCHOOL OF MANAGEMENT, 50 MEMORIAL DRIVE CAMBRIDGE MASSACHUSETTS 02142 USA

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Related research
Keywords: Privatization; portfolio endowment; citizenry; efficiency; diversification; utility theory; information theory; equity; inequality; fairness; corporate governance; employee remuneration; stock options; South Africa; Mideast; Public support;

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