2012

Privatization, Investment and Ownership Efficiency

Reprint No. 2012:39

Author(s): Pehr-Johan Norbäck and Lars PerssonYear: 2012 Title: Oxford Economic Papers Volume (No.): 64 (4) Pages: 765–786
Online article (restrictions may apply)
Preliminary version


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 can affect long-run employment levels when investing 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.


Reference:
Norbäck, Pehr-Johan and Lars Persson (2012), "Privatization, Investment and Ownership Efficiency". Oxford Economic Papers 64(4), 765–786.

Pehr-Johan Norbäck

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Lars Persson

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lars.persson@ifn.se

Interdisciplinary European Studies

The European Union and the Return of the Nation State

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This book explores the complex and ever-changing relationship between the European Union and its member states. The recent surge in tension in this relationship has been prompted by the actions of some member state governments as they question fundamental EU values and principles and refuse to implement common decisions seemingly on the basis of narrowly defined national interests.

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