Economic Perspectives on Privatization

Despite being one of the most fundamental issues in political economy, the question of the appropriate boundary between public and private enterprise received relatively little attention in mainstream economic analysis until quite recently. In the 1980s, however, programs of ownership reform were started in many developed and developing countries. Dramatic though some of these policies have been, they are likely to be overshadowed in the 1990s by even greater privatization in the reforming socialist economies. The opening sections of this paper are organized around three broad and interrelated questions. How does ownership matter for the efficiency of enterprise performance? What is the role for privatization in financing public debts and deficits? What are the distributional and political implications of privatization? Finally we examine privatization in practice in three countries: Britain, Chile, and Poland.