Understanding Privatization Policy: Political Economy and Welfare Effects

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Understanding Privatization Policy Political
Economy and Welfare Effects
Project Co-ordinator Bernardo Bortolotti
(Università di Torino and FEEM)
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Background Global Privatization Revenues
Source Privatization Barometer
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Privatization What we know

• Strong post-privatization performance
  improvements
• Macroeconomic effects public finance, financial
  market development
• Privatization methods politically motivated
• Controversial welfare effects on consumers

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Privatization What we do not know

• What triggers privatization and make it
  politically acceptable?
• Are performance improvements robust to
  counterfactual analyses?
• Do governments relinquish ownership and control
  in privatized firms?
• What are the overall welfare effects of
  divestiture in EU?
• Is privatization per se or associated policies
  (liberalization, regulation, corporate governance
  reforms) that matter more?

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UPP Strategic Objectives

• Identifying the political and institutional
  determinants of privatization
• Analyzing the evolution of corporate governance
  in privatized firms and their effects on
  perfomance
• Evaluating the welfare effects of privatization
  on society
• Finding the most suitable policies to make
  privatization deliver efficiency and growth

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UPP The building blocks

• Part I. The determinants of privatization
• Part II. The methods of privatization
• Part III. the welfare effects of privatization
• Methodology political economy-multidisciplinary
  approach (economics, finance, political science,
  legal disciplines)

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WPs implementation
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The UPP Consortium
Partic. Role Participant name Participant short name Country
CO Fondazione Eni Enrico Mattei FEEM IT
CR Universitat Pompeu Fabra UPF SP
CR University of Milan UMIL IT
CR Universiteit van Amsterdam UvA-CIFRA NL
CR IFO Institute for Economic Research at the University of Munich IFO DE
CR Stiftung Wissenschaft und Politik - Deutsches Institut für Internationale Politik und Sicherheit SWP DE
CR Center for Economic Research and Graduated Education, Charler University CERGE CZ
CR University of Padua UNIPD IT
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WP2 The determinants of privatisation policy

• Objectives
• To provide a conceptual framework to relate the
  observed differences in privatisation outcomes
  across countries to different political and
  institutional settings.
• Deliverables
• Two theoretical papers on the determinants of
  privatisation policy (month12 and 20)
• Guidelines for data collection on political
  institutions (month 6)
• Database on political institutions and political
  orientation (month14)
• Two empirical papers on the determinants of
  privatisation policy (month18 and 20)

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WP3 Privatisation in MEDA countries

• Objectives
• To examine the track record of different forms of
  public ownership and control in MEDA countries
• To evaluate the determinants, methods and
  outcomes of privatization in this area
• Deliverables
• Four reports on privatization and regulatory
  reform in the MEDA region (month 10, 12, 18, and
  20)
• Database on the privatization transactions in the
  MEDA region (month 20)

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WP4 Public vs. private ownership and control

• Objectives
• To develop a theoretical models analysing the
  trade-offs between private and public ownership
  and control of privatized firms and to study
  their evolution overtime
• Deliverables
• Guidelines for data collection on ownership and
  control structures (month 6)
• A theoretical paper on the trade offs between
  public and private ownership and control
  (month14)
• Database on ownership and control structures in
  OECD economies (month 14)
• Two empirical papers on the evolution of
  ownership an control in privatised firms (month
  18 and 20)

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WP5 Performance from transition to EU
integration

• Objectives
• To explore how various ownership and management
  structures affect corporate performance in a main
  transition country such as the Czech Republic.
• Deliverables
• A panel data set on corporate ownership and
  performance in the Czech Republic (month10)
• A theoretical paper on the effect of ownership
  changes in performance (month 14)
• Two empirical papers on company performance in a
  transition economy (month 18 and 20)

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WP6 Welfare effects I

• Objectives
• To study the welfare impact on consumer and
  employees wealth of privatisation, liberalisation
  and regulation of public utilities under
  different policy regimes with special reference
  to SGI
• Deliverables
• Databases on welfare measures for consumers and
  employees (month 8)
• Three empirical papers on the welfare effects of
  privatisation on consumers (month 8, 14 and 20)

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WP7 Welfare effects II

• Objectives
• To consider the fiscal impact of privatisation on
  the current and the long-term budget and to
  relate it with the incentives for government
  policy by means of theoretical and empirical
  analysis
• Deliverables
• A panel database on fiscal measures and
  institutions for European countries (month 8)
• Three empirical papers on the fiscal effects of
  privatization (month 12, 18, 20) 

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WP8 Welfare effects III

• Objectives
• To analyse the risk and return characteristics of
  these indexes using multifactor analysis
• To identify if any - an undiversifiable risk
  factor associated with the residual influence of
  the State in the economic system.
• Deliverables
• A database with daily series of privatization
  indexes (month 12)
• An empirical paper on the stock price performance
  of privatization-related indexes (month 20) 

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WP9 Expert interviews and targeted surveys

• Objective
• To develop a joint / harmonised interviewing and
  survey methodology to be implemented in at least
  the 5 countries - Czech Republic, Germany, Italy,
  Netherlands, Spain represented in the
  consortium on privatisation choices and outcomes
  as perceived by the most relevant stakeholders
• Deliverables
• Standardised questionnaire to be used for
  enterprises in all 5 countries (month 6)
• Frame for in-depth interviews with key informants
  and other relevant stakeholders in all 5
  countries (month 6)
• Report on judgements and qualitative other
  information on politics of privatisation user in
  the individual countries as well in a synthesised
  cross country comparison (month 21)

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WP10 Making privatisation deliver

• Objectives
• To identify policy recommendations for successful
  implementation of privatisation policies, with
  special reference to the enlarged EU and MEDA
  countries
• Deliverables
• Policy report summarising the main
  recommendations (month 24)
• Regulatory guidelines on Corporate Governance,
  Institutional Reform and European Financial and
  Economic Integration (month 24)