Limits to privatization

The limits of different kinds of privatization of the ownership of capital are discussed. Regulation is an exogenous variable in this process and shapes the constraints within which the privatization occurs. In the case of a nonregulated good or service, the question of what goods are produced and w...

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Bibliographic Details
Published inEuropean economic review Vol. 31; no. 1; pp. 346 - 351
Main Author Blankart, Charles B.
Format Journal Article
LanguageEnglish
Published Amsterdam, etc Elsevier B.V 01.02.1987
Elsevier
North Holland Publishing Company, etc
Elsevier Sequoia S.A
SeriesEuropean Economic Review
Subjects
Contracts
Economic theory
Government
Limits
Privatization
Public sector
Regulation
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Summary:The limits of different kinds of privatization of the ownership of capital are discussed. Regulation is an exogenous variable in this process and shapes the constraints within which the privatization occurs. In the case of a nonregulated good or service, the question of what goods are produced and what their quality should be is left to the market. The criterion to privatize is whether it is profitable for the government to hold shares in private industry. Privatization is more ambiguous if supply is public or regulated because the government must maintain quality different from that produced by the market. The arguments for and against having the government contract out or produce the good or service fall into 4 areas: 1. economies of scale or scope, 2. degree of competition in the procurement market, 3. adjustment costs, and 4. quality uncertainty. Some economic activities may be advantageously supplied under private capital ownership. The advantages disappear where rule observation becomes important.
ISSN:0014-2921
1873-572X
DOI:10.1016/0014-2921(87)90050-X