Australian National University
The Political Economy of Privatizaion
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Public enterprises are run for the benefit of the majority, and minority interests are often ignored. Individual's own uncertainty about whether they are part of the majority therefore creates an incentives to privatize to avoid the tyranny of the majority. However, since these individual benefits are not social benefits, it lead to an undesirable bias against collective ownership. Dynamic inconsistency of electoral preference are generated, where voters initially favour and then regret privatization. The model predicts the emergence of welfare reducing sales of unregulated monopolies and socially harmful contracting-out of social services.
PDF file of paper: Not available.
Session: Economic Theory
Time: Friday, 6 July, 8:45am - 10:15am