Privatization in Latin America: What Does the Evidence Say?

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dc.description.abstract Privatization is under attack. Criticisms run from corrupt deals to abuse of market power and social welfare losses. We evaluate the empirical record on privatization, relying on recent comprehensive studies from Latin America. The paper presents four main results. First, the increased profitability of privatized firms is not explained by sample selection biases. Second, in the quest to identify the sources of increased profitability after privatization, we find little evidence that validates concerns of generalized market power abuses, exploitation of workers, and lack of fiscal benefits. Third, the manner in which privatization is carried out matters. Transparency and homogeneity in procedures, speed, and limited restructuring prior to privatization lead to better outcomes and less room for corruption and discretion. Finally, privatization´s success is enhanced by two complementary policies: deregulation or reregulation of industries previously shielded from competitive forces; and an effective corporate governance framework that facilitates privatized firms´ access to capital at lower cost. Overall, the empirical record shows that privatization leads to increased profitability and productivity, firm restructuring, fiscal benefits, output growth, and even quality improvements. Most cases of privatization failure can be linked to poor contract design, opaque processes with heavy state involvement, lack of reregulation, and a poor corporate governance framework. en
dc.title Privatization in Latin America: What Does the Evidence Say? en
dc.contributor.author Chong, Alberto
dc.contributor.author López-de-Silanes, Florencio
dc.date.accessioned 2014-11-10T21:35:17Z
dc.date.available 2014-11-10T21:35:17Z
dc.date.issued 2004-03
dc.identifier.issn 1529-7470
dc.identifier.uri http://hdl.handle.net/123456789/48721
lacea.language.supported en
dc.contributor.other Comments by Luis F. López-Calva and Eduardo Bitrán
dc.language.iso en
dc.publisher Brookings Institution Press
dc.subject Economic development
dc.subject Public sector
dc.subject Privatization
dc.subject Latin America
dc.subject Governance
dc.subject Productivity
dc.type Article

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