An Assessment of Privatization

Posted: 29 Feb 2008

See all articles by Sunita Kikeri

Sunita Kikeri

World Bank

John Nellis

Center for Global Development

Abstract

Mounting empirical evidence of privatization`s benefits coincides with increasing dissatisfaction and opposition among citizens and policymakers. This dissatisfaction reflects the growing questioning of the benefits of privatization, the general downturn of global markets in the past few years and the resulting swing of the pendulum back toward increased governmental supervision, the overselling of privatization as a panacea for all economic problems, and the concern that privatization does not produce macroeconomic and distributional gains equivalent to its microeconomic benefits. This article takes stock of the empirical evidence and shows that in competitive sectors privatization has been a resounding success in improving firm performance. In infrastructure sectors, privatization improves welfare, a broader and crucial objective, when it is accompanied by proper policy and regulatory frameworks. The article argues that despite the growing concerns privatization should be neither abandoned nor reversed. Rather, there should be a strengthening of efforts to privatize correctly: by better tailoring privatization to local conditions, deepening efforts to promote competition and regulatory frameworks, enforcing transparency in sales processes, and introducing mechanisms to ensure that the poor have access to affordable essential services.

Suggested Citation

Kikeri, Sunita and Nellis, John, An Assessment of Privatization. World Bank Research Observer, Vol. 19, No. 1, pp. 87-118, Spring 2004, Available at SSRN: https://ssrn.com/abstract=873727

Sunita Kikeri (Contact Author)

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

John Nellis

Center for Global Development ( email )

2055 L St. NW
5th floor
Washington, DC 20036
United States
202-416-0724 (Phone)

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