Corruption and Positive Selection in Privatization
M. Cristina Molinari
Department of Economics University Ca' Foscari of Venice; SSAV
Ca Foscari University of Venice
December 4, 2008
University Ca' Foscari of Venice, Dept. of Economics Research Paper Series No. 43/WP/2008
We consider the supply of a public good based on a publicly-owned facility. The Government has a choice between provision in-house and privatizing the facility and then outsourcing the production. In particular, we focus on corruption in the decision to privatize and on its effect on social welfare when there is asymmetric information on the public and private manager's efficiency. Our analysis shows that a corrupt Government, that chooses to privatize only in exchange for a bribe, makes a positive selection on the private firm's efficiency and, thus, may raise expected social welfare above what an honest Government could get.
Number of Pages in PDF File: 18
Keywords: Corruption, Privatization, Private vs. public provision
JEL Classification: D73, H44, K42, L33working papers series
Date posted: December 6, 2008
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo1 in 1.735 seconds