On the virtues of privatization when government is benevolent

This paper shows that privatizing a public firm can be welfare improving even if the government is a welfare maximizer. We consider a setup where the firm’s owner (a profit-maximizing entrepreneur or a benevolent government) employs a manager who can invent and implement an innovative production tec...

Ausführliche Beschreibung

Gespeichert in:
Bibliographische Detailangaben
Veröffentlicht in:Journal of economic behavior & organization 2007-09, Vol.64 (1), p.17-34
1. Verfasser: Lulfesmann, Christoph
Format: Artikel
Sprache:eng
Schlagworte:
Online-Zugang:Volltext
Tags: Tag hinzufügen
Keine Tags, Fügen Sie den ersten Tag hinzu!
Beschreibung
Zusammenfassung:This paper shows that privatizing a public firm can be welfare improving even if the government is a welfare maximizer. We consider a setup where the firm’s owner (a profit-maximizing entrepreneur or a benevolent government) employs a manager who can invent and implement an innovative production technology. Wage arrangements are optimal given the verifiable information, all parties behave rationally and the information structure is the same in both governance modes. Nevertheless, privatization turns out to be preferable in a wide variety of situations. Government ownership yields the first best if producing under the ‘old’ technology is not viable.
ISSN:0167-2681
1879-1751
DOI:10.1016/j.jebo.2003.11.016