INSTITUTIONAL ENVIRONMENT AND PARTIAL PRIVATIZATIONS: POLICY IMPLICATIONS FOR LOCAL GOVERNMENTS

The literature identifies hard budget constraints, stock market liquidity, political preferences and legal origins as the main determinants of full and partial privatization. Nonetheless, the institutional environment, understood as the functioning of a diverse set of de facto institutions and arrangements, is fundamental for privatization decisions and outcomes. A multi-dimensional and cross-country approach is proposed to shed some light on the institutional characteristics that typically are associated with different choices (partial sales ratio, percentage of private ownership) and privatization outcomes (closeness of sale prices to market levels, public vs private interest). The purpose of this paper is to learn lessons from country institutional profiles and provide local governments with a basic frame to understand their institutional settings and prioritize instrumental reforms for privatization. Results suggest that strategy and administrative burden are important determinants of privatization outcomes, and that government commitment and strategic approach to privatization is usually associated to partial privatizations.