Political and Economic Determinants of the Likelihood of Privatizing Argentine Public Banks
Posted: 17 Apr 2002
This paper studies the political economy of bank privatization in Argentina following institutional changes related to the implementation of the Convertibility plan and the Tequila Crisis. The empirical results strongly support the hypothesis that political incentives affect the likelihood of privatization. We find: (i) poorly performing banks were more likely to be privatized; (ii) overstaffing tended to reduce the probability of privatization; (iii) large banks were less likely to be privatized; and (iv) higher provincial unemployment and higher shares of public employees reduced the probability of privatization. Although the hypotheses were tested for a specific industry in a specific country, making it possible to control for enterprise performance and institutional characteristics, it seems reasonable that similar results might hold in other industries and countries.
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