Infrastructure and Public Utilities Privatization in Developing Countries

The paper analyzes governments' tradeoff between fiscal benefits and consumer surplus in privatization reforms of noncompetitive industries in developing countries. Under privatization, the control rights are transferred to private interests so that public subsidies decline. This benefit for ta...

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Bibliographic Details
Main Authors:	Auriol, Emmanuelle, Picard, Pierre M.
Format:	Policy Research Working Paper
Language:	English
Published:	World Bank, Washington, DC 2012
Subjects:	ADVERSE SELECTION ASSET SALES ASYMMETRIC INFORMATION AUCTION AUCTIONS BENCHMARK BENEFITS OF PRIVATIZATION BIDDERS BUDGET CONSTRAINT BUDGET CONSTRAINTS CAPITAL FLOWS COMPETITIVE INDUSTRIES CONCESSION CONTRACTS CONSUMER SURPLUS CONSUMERS COST FUNCTIONS COURNOT COMPETITION CREDIT RATINGS CROSS-BORDER DEBT DEMAND FUNCTION DEMAND FUNCTIONS DIVESTITURE DOMESTIC FINANCING DUOPOLY ECONOMIC ASSISTANCE ECONOMIC PERFORMANCE ECONOMIC RISK ECONOMIES OF SCALE EFFECTIVE REGULATION EFFICIENCY GAINS EFFICIENCY OF FIRMS EFFICIENT MANAGEMENT ELECTRICITY EXCLUSIVITY PERIOD EXCLUSIVITY PERIODS EXECUTIVE DIRECTORS EXPECTED RETURNS FINANCIAL DISCIPLINE FINANCIAL OBLIGATION FIXED COSTS FOREIGN DIRECT INVESTMENT GDP GOVERNMENT BUDGET GOVERNMENT SUBSIDIES HAZARD RATE INCENTIVE CONTRACTS INCOME LEVELS INCREASING RETURNS INCREASING RETURNS TO SCALE INDUSTRIAL POLICY INEFFICIENCY INFORMATION ASYMMETRY INFORMATION COSTS INSTITUTIONAL INVESTOR INVESTMENT STRATEGIES LACK OF TRANSPARENCY LEGAL OBLIGATIONS LOCAL SERVICES MARGINAL COST MARGINAL COST OF PRODUCTION MARGINAL COSTS MARKET ENTRY MARKET LIBERALIZATION MARKET POWER MARKET SEGMENT MONOPOLIES MONOPOLY MONOPOLY PRICES MORAL HAZARD NASH EQUILIBRIUM NATURAL MONOPOLIES NATURAL MONOPOLY OPPORTUNITY COST OPPORTUNITY COSTS OWNERSHIP STRUCTURE PERFECT INFORMATION PERFORMANCE OF PRIVATE PERFORMANCE OF PUBLIC POLITICAL RISK PRICE INCREASES PRICE LIBERALIZATION PRICE REGULATION PRIVATE CONTROL PRIVATE ENTREPRENEURS PRIVATE FIRM PRIVATE FIRMS PRIVATE INTERESTS PRIVATE INVESTORS PRIVATE MONOPOLIES PRIVATE MONOPOLY PRIVATE OPERATORS PRIVATE OWNERSHIP PRIVATE SECTOR PRIVATIZATION PRIVATIZATION DECISION PRIVATIZATION PLAN PRIVATIZATION PROCEEDS PRIVATIZATION PROCESSES PRIVATIZATION PROGRAMS PRIVATIZATION TRENDS PRIVATIZATIONS PRODUCT MARKET PUBLIC PUBLIC ASSETS PUBLIC DEFICIT PUBLIC ENTERPRISES PUBLIC EXPENDITURE PUBLIC FINANCE PUBLIC FINANCES PUBLIC FUNDS PUBLIC GOODS PUBLIC INVESTMENT PUBLIC OWNERSHIP PUBLIC SUBSIDIES PUBLIC UTILITIES REGULATORY AGENCY REGULATORY BODIES RETURNS ON INVESTMENT RISK NEUTRAL SALE SALE PRICE SHAREHOLDERS SOCIALIST ECONOMIES SOFT BUDGET CONSTRAINTS SPREAD STATE OWNED ENTERPRISES STATE OWNERSHIP SURPLUSES TAX TAX REVENUE TAXATION TOTAL REVENUE TRANSPARENCY
Online Access:	http://documents.worldbank.org/curated/en/2006/06/6875022/infrastructure-public-utilities-privatization-developing-countries http://hdl.handle.net/10986/8429

Description
Summary:	The paper analyzes governments' tradeoff between fiscal benefits and consumer surplus in privatization reforms of noncompetitive industries in developing countries. Under privatization, the control rights are transferred to private interests so that public subsidies decline. This benefit for tax-payers comes at the cost of price increases for consumers. In developing countries, tight budget constraints imply that privatization may be optimal for low profitability segments. For highly profitable public utilities, the combination of allocative inefficiency and critical budgetary conditions may favor public ownership. Finally, once a market segment gives room for more than one firm, governments prefer to regulate the industry. In the absence of a credible regulatory agency, regulation is achieved through public ownership.

Infrastructure and Public Utilities Privatization in Developing Countries

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