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Privatization, Investment and Ownership Efficiency

Author

Listed:
  • Friberg, Richard

    (Stockholm School of Economics)

  • Norbäck, Pehr-Johan

    (Research Institute of Industrial Economics (IFN))

  • Persson, Lars

    (Research Institute of Industrial Economics (IFN))

Abstract

We provide a model that explains the following empirical observations: i) private ownership is more efficient than public ownership, ii) privatizations are associated with increases in efficiency and iii) the increase in efficiency predates the privatization. The two key mechanisms explaining the results are: (i) a government owner keeping control takes into account the negative effect on employment of investment and (ii) a privatizing government has a stronger incentive to invest than an acquiring firm: the government exploits the fact that investments increase the sales price not only due to the increase in the acquirer's profit, but also due to a reduced profit for the non-acquirer.

Suggested Citation

  • Friberg, Richard & Norbäck, Pehr-Johan & Persson, Lars, 2008. "Privatization, Investment and Ownership Efficiency," Working Paper Series 744, Research Institute of Industrial Economics.
    • Handle: RePEc:hhs:iuiwop:0744
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Privatization; Asset Ownership; Restructuring; Oligopoly;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
    • P31 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Socialist Enterprises and Their Transitions

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