Privatization is the transfer from government to private parties of the ownership of firms. Privatization programmes have been carried out worldwide since the mid-1980s, with important consequences for economic efficiency, public finance, and distribution. In competitive industries privatization generally has positive effects on incentives and performance. The economic consequences of privatizing firms with market power depend on the effectiveness of regulation and competition policy. These points are illustrated by experience in Britain, a leading exponent of privatization policies.
KeywordsAllocative efficiency Bankruptcy Barriers to entry Bonds Commitment Competition law and policy Competitive tendering Control rights Cross-subsidy Duopoly policy Expropriation Firm, theory of Hard budget constraint Interconnection Liberalization Market power Merger policy Ownership Present value Price cap regulation Price control Principal and agent Privatization Public finance Public–private partnerships Rate-of-return regulation Redistribution of wealth Regulation of monopoly Share options State-owned enterprises Takeovers Universal service obligations
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