Skip to main content
SpringerLink
Log in

Privatization, Efficiency, and Economic Growth

  • Chapter
The Socio-Economic Transformation

Abstract

Privatization is shown to increase national economic output in a two-sector full-employment general-equilibrium model by enhancing efficiency as if a relative price distortion were being removed through price reform, trade liberalization, or stabilization. The static output gain from reallocation and reorganization through privatization is captured in a simple formula in which the gain is a quadratic function of the original distortion stemming from an excessive public sector. Substitution of plausible parameter values into the formula indicates that, in practice, the static output gain from privatization may be large. The potential dynamic output gain from privatization also appears to be substantial.

This study was initially prepared for an international conference on Transition to Advanced Market Institutions and Economies organized by the Systems Research Institute, Polish Academy of Sciences, and Polish Operational and Systems Research Society, Warsaw, 18–21 June 1997. Gylfi Magnusson, Gylfi Zoega, and two anonyous referees made helpful comments on earlier versions of the paper. Support from the Swedish Council for Humanistic and Social Science Research (HSFR) is gratefully acknowledged.

This is a preview of subscription content, log in via an institution to check access.

Access this chapter

Log in via an institution
Chapter
USD 29.95
Price excludes VAT (USA)
  • Available as PDF
  • Read on any device
  • Instant download
  • Own it forever
eBook
USD 84.99
Price excludes VAT (USA)
  • Available as PDF
  • Read on any device
  • Instant download
  • Own it forever
Hardcover Book
USD 109.99
Price excludes VAT (USA)
  • Durable hardcover edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info

Tax calculation will be finalised at checkout

Purchases are for personal use only

Institutional subscriptions

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  • Blanchard, O. (1997) The Economics of Post-Communist Transition. Oxford: Clarendon Press.

    Google Scholar 

  • Borensztein, E., D.G. Demekas, and J.D. Ostry (1993) An Empirical Analysis of the Output Declines in Three Eastern European Countries. IMF Staff Papers, 40(1), March, 1–31.

    Article  Google Scholar 

  • Bruno, M. (1992) Stabilization and Reform in Eastern Europe. IMF Staff Papers, 39(4), December, 741–77.

    Article  Google Scholar 

  • Calvo, G.A., and F. Coricelli (1993) Output Collapse in Eastern Europe. IMF Staff Papers, 40(1), March, 32–52.

    Article  Google Scholar 

  • Cecchini, P. (1988) The European Challenge 1992. Aldershot: Gower.

    Google Scholar 

  • Easterly, W. (1992) Endogenous Growth in Developing Countries with Government-induced Distortions. Chapter 9 in: V. Corbo, S. Fischer, and S.B. Webb (eds.) Adjustment Lending Revisited. Washington, DC: The World Bank.

    Google Scholar 

  • Fischer, S. (1974) Money and the Production Function. Economic Inquiry, 12, December, 517–33.

    Article  Google Scholar 

  • Grossman, G., and E. Helpman (1991) Innovation and Growth in the Global Economy. Cambridge, MA and London: MIT Press.

    Google Scholar 

  • Gylfason, T. (1993) Output Gains from Economic Liberalization: A Simple Formula. Chapter 4 in L. Somogyi (ed.) The Political Economy of the Transition Process in Eastern Europe. London: Edward Elgar.

    Google Scholar 

  • Gylfason, T. (1995) The Macroeconomics of European Agriculture. Princeton Studies in International Finance, 78, May.

    Google Scholar 

  • Gylfason, T. (1998) Output Gains from Economic Stabilization. Journal of Development Economics, 56(1), 81–96.

    Article  Google Scholar 

  • Mussa, M. (1982) Government Policy and the Adjustment Process. In: J.N. Bhagwati (ed.) Import Competition and Response. Cambridge, MA: The University of Chicago Press and National Bureau of Economic Research, 73–120.

    Google Scholar 

  • Romer, P.M. (1986) Increasing Returns and Long-run Growth. Journal of Political Economy, 94, October, 1002–37.

    Article  Google Scholar 

  • Romer, P.M. (1989) Capital Accumulation in the Theory of Long Run Growth. In: R.J. Barro (ed.) Modern Business Cycle Theory. Cambridge, MA: Harvard University Press, 51–127.

    Google Scholar 

  • Williamson, J. (1993) Why Did Output Fall in Eastern Europe? Chapter 2 in: L. Somogyi (ed.) The Political Economy of the Transition Process in Eastern Europe. London: Edward Elgar.

    Google Scholar 

  • World Bank (1995) Bureaucrats in Business: The Economics and Politics of Government Ownership. Oxford: Oxford University Press.

    Google Scholar 

  • World Bank (1997) World Development Report. Oxford: Oxford University Press.

    Google Scholar 

Download references

Authors
  1. Thorvaldur Gylfason
    View author publications

    You can also search for this author in PubMed Google Scholar

Editor information

Editors and Affiliations

  1. Systems Research Institute, Polish Academy of Sciences, Poland

    Zbigniew Nahorski (Professor, Dean, Editor-in-Chief) (Professor, Dean, Editor-in-Chief)

  2. Computer Science Department, Warsaw School of Information Technology, Poland

    Zbigniew Nahorski (Professor, Dean, Editor-in-Chief) (Professor, Dean, Editor-in-Chief)

  3. Systems Research Institute, Polish Academy of Sciences in Warsaw, Poland

    Jan W. Owsiński (adjoint professor) (adjoint professor)

  4. Division of Decision Analysis and Support in the Institute of Econometrics, Warsaw School of Economics (WSE), Poland

    Tomasz Szapiro (Professor, Head, Adjunct Professor) (Professor, Head, Adjunct Professor)

  5. Modern Civilization of WSE, Poland

    Tomasz Szapiro (Professor, Head, Adjunct Professor) (Professor, Head, Adjunct Professor)

  6. International Business Studies at Carlson School of Business, University of Minneapolis, Minnesota, USA

    Tomasz Szapiro (Professor, Head, Adjunct Professor) (Professor, Head, Adjunct Professor)

Copyright information

© 2007 Thorvaldur Gylfason

About this chapter

Cite this chapter

Gylfason, T. (2007). Privatization, Efficiency, and Economic Growth. In: Nahorski, Z., Owsiński, J.W., Szapiro, T. (eds) The Socio-Economic Transformation. Palgrave Macmillan, London. https://doi.org/10.1057/9780230379039_3

Download citation

Publish with us

Policies and ethics

Search

Navigation