Privatization, Investment and Ownership Efficiency

26 Pages Posted: 2 Feb 2011

See all articles by Richard Friberg

Richard Friberg

Stockholm School of Economics - Department of Economics

Pehr-Johan Norbäck

Research Institute of Industrial Economics (IFN)

Lars Persson

Research Institute of Industrial Economics (IFN); Centre for Economic Policy Research (CEPR)

Date Written: April 10, 2008

Abstract

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 takes into account the negative effect on employment of investment 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.

Keywords: Privatization, Asset Ownership, Restructuring, Oligopoly

JEL Classification: D44, L13, L33, L40, P31

Suggested Citation

Friberg, Richard and Norbäck, Pehr-Johan and Persson, Lars, Privatization, Investment and Ownership Efficiency (April 10, 2008). IFN Working Paper No. 744. Available at SSRN: https://ssrn.com/abstract=1752947 or http://dx.doi.org/10.2139/ssrn.1752947

Richard Friberg

Stockholm School of Economics - Department of Economics ( email )

P.O. Box 6501
Sveavagen 65
S-113 83 Stockholm
Sweden
+46 8 736 9645 (Phone)
+46 8 720 7752 (Fax)

Pehr-Johan Norbäck (Contact Author)

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

Lars Persson

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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