Privatization and Capital Formation in Developing Countries: An Empirical Analysis

29 Pages Posted: 23 Sep 2010 Last revised: 4 Oct 2013

See all articles by Abdella Abdou

Abdella Abdou

Brandon University

Saeed Moshiri

Saint Thomas More College University of Saskatcehwan

Date Written: November 22, 2009

Abstract

The spur for privatization and its impact on economic performance have been analyzed from many perspectives including microeconomics, macroeconomics, and institutional economics. Previous research has focused on the firm level efficiency reasons for privatization, and the relative performance of state-owned enterprises and privately owned firms. This paper investigates the macroeconomic facet of privatization with particular attention paid to the relation between privatization and capital formation in developing countries. Our study uses recent World Bank data on privatization for 117 countries over the time period 1988-2003. We explore the impact of privatization on capital formation by conducting two-stage least squares and ordinary least squares estimations and using three time frames. Our findings indicate that the effect of privatization on capital formation varies across regions and time frames. In the long-run privatization is neutral with regard to investment.

Keywords: privatization, total investment, private investment, developing

JEL Classification: O16, L33, P26

Suggested Citation

Abdou, Abdella and Moshiri, Saeed, Privatization and Capital Formation in Developing Countries: An Empirical Analysis (November 22, 2009). International Review of Applied Economics, Vol. 23, No. 5, 2009, Available at SSRN: https://ssrn.com/abstract=1681006

Abdella Abdou

Brandon University ( email )

Brandon, Manitoba
Canada

Saeed Moshiri (Contact Author)

Saint Thomas More College University of Saskatcehwan ( email )

1437 College Dr
Saskatoon, Saskatchewan S7N 0W6
Canada

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