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The Financial Economics of Privatization$
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William Leon Megginson

Print publication date: 2005

Print ISBN-13: 9780195150629

Published to Oxford Scholarship Online: October 2005

DOI: 10.1093/0195150627.001.0001

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Why Do Countries Privatize?

Why Do Countries Privatize?

(p.31) 2 Why Do Countries Privatize?
The Financial Economics of Privatization

William Leon Megginson (Contributor Webpage)

Oxford University Press

This chapter begins by framing the theoretical debate about the legitimacy and efficiency of state ownership of business enterprises, and then examines the empirical evidence for and against state ownership. Since the evidence overwhelmingly indicates that state ownership is less efficient than private ownership in most real industrial settings, the reform of state-owned enterprises (SOEs) by measures short of privatization, such as exposing state enterprises to competition or imposing hard budget constraints is assessed. While some economic reforms can be effective in their own right, the question of whether these reforms would be more effective if coupled with a shift to private ownership remains unanswered. Thus, many countries have decided to launch large-scale privatization programs. The fiscal and macroeconomic impact of these programs on the public finances of divesting countries are examined.

Keywords:   privatization, state ownership, business enterprises, state-owned enterprises, SOE, competition, deregulation

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