Welfare Consequences of Selling Public Enterprises: An Empirical Analysis

Abstract

This publication is the first comprehensive empirical study of divestiture to measure its effects on sellers, buyers, consumers, workers, and competitors. The study measures changes in producer and consumer surplus and answers questions about who won, who lost, by how much, and why. It compares the pre- and postdivestiture performance of enterprises and what the latter would have been under continued public ownership. The sample includes case studies of twelve enterprises in four countries: one industrial (the United Kingdom) and three middle-income (Chile, Malaysia, and Mexico). The enterprises analyzed are in the fields of aviation, energy, telecommunications, transportation and shipping, and gambling. Eleven of the twelve ventures succeded in benefiting most economic actors and their countries. This overwhelming success followed from the fact that the countries here described did most things right although details of the right things were not always the same for each country or each case. Because the sample is small and nonrandom, the results of the study cannot be used for prediction, especially in very poor countries or in the former centrally planned economies. However, because these results are the first to provide evidence of what works and what does not, they can be used prescriptively, as they are in the last chapter, as a basis for policy recommendations.

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