Does Inefficiency Justify Privatization? The Case of Intermediate Industry Monopolies

Glomm, Gerhard; Mendez, Fabio

doi:10.2139/ssrn.591658

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Does Inefficiency Justify Privatization? The Case of Intermediate Industry Monopolies

27 Pages Posted: 17 Sep 2004

See all articles by Gerhard Glomm

Gerhard Glomm

Indiana University Bloomington - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Fabio Mendez

University of Arkansas - Sam M. Walton College of Business

Date Written: September 2004

Abstract

In this paper, we study the divestiture of state monopolies frequently found in intermediate industries. Using a theoretical model of an aggregate economy, we restrict our attention to the case where the monopolistic structure is preserved in the process of privatization. We consider the presence of productive inefficiencies within the state monopolies as well as the impact of other inefficiencies produced by slow bureaucracies. Moreover, we allow these SOE's to run publicly financed deficits. We then use the results of the model to analyze the macroeconomic impact of such privatizations.

Keywords: Privatization

JEL Classification: O20, O40

Suggested Citation: Suggested Citation

Glomm, Gerhard and Mendez, Fabio, Does Inefficiency Justify Privatization? The Case of Intermediate Industry Monopolies (September 2004). Available at SSRN: https://ssrn.com/abstract=591658 or http://dx.doi.org/10.2139/ssrn.591658