Why Do Governments Divest?, 2001 The Macroeconomics of Privatization

On an unprecedented scale, nations at all income levels and across the political spectrum have initiated privatization programs over the past twenty years. In the course of this privatization movement, microeconomic efficiency arguments have become the standard justification for the divestment of public assets. This book presents an alternate view and argues that short-term macroeconomic considerations are often the true motive behind privatization programs. Why DoGovernment Divest? The Macroeconomics of Privatization is a comprehensive treatment of the macroeconomic issues of privatization. In addition to reviewing topics in economic growth and efficiency, this book explores the fiscal, monetary, balance-of-payments, and employment aspects of privatization. Several diverse case studies illustrate how the pursuit of such short-term political objectives can reduce the benefits of privatization.

Introduction.- Economic Growth and Efficiency.- Growth theories and empirical growth studies.- The impact of privatization on output.- Social security and privatization.- Summary.- The Politics of Privatization.- Political-economy theories of macroeconomic policymaking.- Government behavior and privatization.- Summary.- Fiscal Considerations of Privatization.- The intertemporal budget constraint.- Ricardian equivalence.- The one period budget constraint.- Fiscal motives of large industrialized economies: privatization in Germany and EMU.- Summary.- Macroeconomic Considerations of Privatization.- Monetary aggregates and inflation.- Balance-of-payments crises.- Employment considerations of privatization.- Political considerations and retrenchment benefits: the case of Pakistan.- Summary.- Modeling the Effects of Privatization.- Outline of the framework.- Baseline scenario.- Privatization scenarios.- Summary.- Appendix.- Coming Full Circle: The Case of Jamaica.- Background.- The role of the government and Jamaica`s growth puzzle.- Jamaica`s political system and half-hearted reforms.- Summary.- Summary and Conclusion.- References.