Institutional Environment and Partial Privatizations: Policy Implications for Local Governments

Abstract

The literature identifies hard budget constraints, stock market liquidity, political preferences and legal origins as the main determinants of full and partial privatization. Nonetheless, the institutional environment, understood as the functioning of a diverse set of de facto institutions and arrangements, is fundamental for privatization decisions and outcomes. A multi‐dimensional and cross‐country approach is proposed to shed some light on the institutional characteristics that typically are associated with different choices (partial sales ratio, percentage of private ownership) and privatization outcomes (closeness of sale prices to market levels, public vs private interest). The purpose of this paper is to learn lessons from country institutional profiles and provide local governments with a basic frame to understand their institutional settings and prioritize instrumental reforms for privatization. Results suggest that strategy and administrative burden are important determinants of privatization outcomes, and that government commitment and strategic approach to privatization is usually associated to partial privatizations.

Effective State Ownership Administration in the Context of the Privatization Process in Russia

“…Modern economics theory does not doubt the importance of institutes for the economic growth. Moreover, the interrelation between the quality of the institutional environment and the rates of the economic growth is confirmed in numerous researches (Clague et al, 1997;Rodrik, Subramanian, & Trebbi, 2004;Cox, 2008;Pargendler, 2012;Marra & Carlei, 2014). Scientists, as a rule, take a start from economic-mathematical models that allow tracking the influence of institutional factors on the rates of economic growth.…”

“…This is the subject of scientific research in such fields as institutional economics (Coase, 1960;Alchian & Demsetz, 1973;Pejovich, 1990), public choice theory (Buchanan, 1978), and the theory of "collective action" (Olson, 1982). Scientists unanimously indicate the need for the increase of effectiveness in state ownership management (Clague, Keefer, Knack, & Olson, 1997;Cox, 2008;Pargendler, 2012;Marra & Carlei, 2014). The problems of effective use of state ownership are of interest from the practical point of view.…”

Planning and Decision Making in Public Management

“…Political transformation in Polish conditions certainly contributed in long term to economic growth, which for many years was significantly faster than growth of salary, to integration with global economy and increase of efficiency (Marra and Carlei 2014). However, it incurred a high social cost.…”

“…Privatisation often could have served to favour and create specific business groups, which in one form or another could finance a particular political party (Szanyi 2013). Lack of transparency of many processes and mechanisms of action of political class and unusually expansive at that time "cunning" entrepreneurship finally had influence on the significant decrease of effectiveness of privatisation (Marra and Carlei 2014) and degree of realisation of assumed goals. At the same time we need to remember, that the employees of public sector fundamentally differ in acceptance of risk, since to various degrees they are vulnerable to shocks arising in the economy (Kallianiotis 2013).…”

Local Mixed Companies: The Theory and Practice in an International Perspective

“…The article by Marra and Carlei () presents, on a large‐scale basis, an investigation on the institutional environment in which privatizations occur. It is well known that the planning of privatization operations requires much more than just the selection of which firms to privatize, the setting of price per share, the revenue target and percentage of stock to sell.…”