Bureaucrats in Business: The Economics and Politics of Government Ownership

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World Bank Publications, 1995 - Business & Economics - 346 pages
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Despite more than a decade of privatization, state-owned enterprises account for nearly as large a share of developing countries' economies today as twenty years ago. Often inefficient government firms and the resulting deficits hinder growth, making it harder for people to escape poverty. Drawing on extensive data and detailed case studies, this report shows students how divestiture and other reforms can improve the economy, and why politics often impedes reform. It also focuses on how successfully reformed countries have overcome such obstacles. The authors analyze three types of company contracts: performance contracts between a government and a public manager, management contracts between a government and the private manager of a government firm, and regulatory contracts between a government and a privatized, regulated monopoly. The authors then study the reasons why so few countries have reformed, and conclude with a final chapter that draws on these findings to present detailed guidance on how to reform state-owned enterprises successfully.

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Page xix - GATT General Agreement on Tariffs and Trade GDP gross domestic product GN'P gross national product...
Page 3 - Bureaucrats typically perform poorly in business, not because they are incompetent (they aren't), but because they face contradictory goals and perverse incentives that can distract and discourage even very able and dedicated public servants.
Page xi - In this respect, our argument corresponds with a 'key finding' of a recent World Bank report on state-owned enterprise 'that political obstacles are the main reason that state enterprise reform has made so little headway in the last decade'.
Page 51 - Millward (1988: 157) concludes that 'there is no evidence of a statistically satisfactory kind to suggest that public enterprises in LDCs have a lower level of technical efficiency than private firms operating at the same scale of operation. On a less formal level the tendency seems to be nevertheless pointing in that direction'.
Page 32 - Bank (1995: 32) concludes that '. . . divestiture has yet to change substantially the balance between the state-owned and private sectors in the majority of developing countries'.
Page xix - NAFTA North American Free Trade Agreement OECD Organisation for Economic Co-operation and Development...
Page 37 - Thus, Vickers and Yarrow (1988, 426) conclude, "theoretical analysis and empirical evidence support the view that private ownership is most efficient — and hence privatization is most suitable — in markets where effective (actual and potential) competition prevails.
Page 1 - Indeed, as data compiled for this study show, the size of the state-owned enterprise sector has significantly diminished only in the former socialist economies and a few middle-income countries.
Page 39 - One study evaluated these questions in a sample of twelve divestiture case studies in four countries (Chile, Malaysia, Mexico, and the United Kingdom). The cases cover nine monopolies (in telecommunications, energy, airlines, and ports) and three firms in competitive markets (in trucking, gambling, and electricity generation). They find that in eleven of the twelve cases divestiture made the world a better place by fostering more efficient operation and new investment. The gains in some cases were...
Page 171 - In addition, a survey of key government and enterprise officials, using a standardized questionnaire and interviews with knowledgeable persons in the country and World Bank, provided further background. See Dyer Cisse (1994) for the sample questionnaire. Although every effort was made to verify the accuracy of the data, in some cases the underlying information systems are weak. However, it seems plausible that errors are not correlated over time and do not greatly affect the trend analysis. Where...

About the author (1995)

The World Bank Group is a group of five international organizations responsible for providing finance and advice to countries for the purposes of economic development and poverty reduction, and for encouraging and safeguarding international investment. The group and its affiliates have theirheadquarters in Washington, D.C., with local offices in 124 member countries.

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