Privatisations as Price Reforms: Evaluating Consumers' Welfare Changes in the UK

30 Pages Posted: 30 May 2011

See all articles by Rinaldo Brau

Rinaldo Brau

UniversitĂ  di Cagliari - Department of Economics & Business; Universita di Cagliari - Centre for North South Economic Research (CRENOS)

Massimo Florio

University of Milan - Department of Economics, Management and Quantitative Methods (DEMM)

Date Written: September 2002

Abstract

This paper analyses the effects on consumers' welfare of the privatisation policy carried out in the UK since 1979. The approach we follow sees the privatisation of a State owned enterprise within the broader framework of the policy reform theory (Dreze and Stern, 1990). By adopting this perspective, the change in consumers' welfare with and without privatisations can be studied by appropriate welfare measures.

We claim that an advantage of our approach is that of being able to provide the required welfare assessment in a simplified way by means of a limited set of information. In particular, we show that a series of welfare measures only based on aggregate information can be used once one becomes ready to accept the use of first and second order approximations and a few reasonable assumptions on the shape of demand functions. These welfare measures are subsequently used for the evaluation of the welfare effects related to price variations in seven British privatised public utilities. We conclude that the contribution to consumers' welfare of the privatisation policy in the UK, when compared to the huge transfers involved in the process, has been rather modest.

Keywords: Privatisation, Welfare Measurement

Keywords: Privatization, prices, UK

JEL Classification: L33, D6, D12

Suggested Citation

Brau, Rinaldo and Florio, Massimo, Privatisations as Price Reforms: Evaluating Consumers' Welfare Changes in the UK (September 2002). FEEM Working Paper No. 67.2002, Available at SSRN: https://ssrn.com/abstract=334980 or http://dx.doi.org/10.2139/ssrn.334980

Rinaldo Brau (Contact Author)

UniversitĂ  di Cagliari - Department of Economics & Business ( email )

V. S. Ignazio 17
Cagliari 09123, CA 09123
Italy
+39 070 6753315 (Phone)
+39 178 2243016 (Fax)

Universita di Cagliari - Centre for North South Economic Research (CRENOS) ( email )

V. S. Ignazio 78
Cagliari, 09124
ITALY

Massimo Florio

University of Milan - Department of Economics, Management and Quantitative Methods (DEMM) ( email )

Via Conservatorio 7
I-20122 Milano, 20122
Italy
+39 02 50321510 (Phone)
+39 02 50321505 (Fax)

HOME PAGE: http://www.demm.unimi.it/ecm/home

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