cost reduction competition and industry performance in many markets firms compete over time by expending resources with the purpose of reducing their costs sometimes the cost reducing investments operate directly on costs in many instances they take the form of developing new products that deliver what customers need more cheaply therefore product development can have the same ultimate effect as direct cost reduction in fact if one thinks of the product as the services it delivers to the customer in the way that lancaster pioneered then product development often is just cost reduction

cooperative and noncooperative r d in duopoly with spillovers contrary to the usual assumption made in most oligopoly models relations among firms are seldom of a wholly cooperative or noncooperative type in many situations they compete in some fields while they cooperate in others an important example is the case of cooperative research efforts bringing fierce competitors together two types of agreement are observed first r d cooperation can take place at the so called precompetitive stage companies share basic information and efforts in the r d stage but remain rivals in the market place 1 a second type of agreement involves an extended collusion between partners creating common policies at the product level the usual justifications of this extension are the difficulties of protecting intellectual property the idea is then to allow partners who have achieved inventions together to also control together the processes and products which embody the results of their collaboration in order to recuperate jointly their r d investments 2 what could be expected from these types of agreement is a reduction in r d expenditures because of less wasteful duplication and a reduction of total production because of more reprinted from the american economic review 78 5 1133 1137 1988 center for operations research econometrics 1348 louvain la neuve belgium we are grateful to jean

evidence from an experiment on charity to welfare recipients reciprocity altruism and the empathic responsiveness hypothesis this article investigates the determinants of generosity in an experiment on charity to real life welfare recipients it tests the effects of various measures of unconditional altruism and conditional or reciprocal altruism the results show strong support for conditional or reciprocal altruism however people who are self reported unconditional altruists make offers that are highly elastic with respect to the apparent worthiness of the recipient one interpretation of this is that self reported unconditional altruists have combined desires to help others and to reciprocate unconditional altruism and reciprocal altruism may not be independent motives i refer to this combination as empathic responsiveness

occupation and the political economy of trade job routineness offshorability and protectionist sentiment the recent backlash against globalization in many advanced economies raises questions about the source of this protectionist sentiment traditional accounts generally attribute the welfare consequences of trade to skill level or industry characteristics or instead emphasize the nonmaterial determinants of support for openness consequently we know little about how a major labor market characteristic occupation shapes both the distributional consequences of and preferences toward trade openness we propose and test a new theory of trade policy preferences based on occupation characteristics drawing from the tasks literature in economics we argue that occupation characteristics are a key determinant of how trade affects workers and thus individuals trade preferences our theory suggests that in advanced economies individuals in routine task intensive occupations will be negatively affected by trade and thus more protectionist this relationship will increase in the degree to which occupation job tasks can be provided from a distance i e offshorable we find support for our theory using data from the 2003 and 2013 international social survey programme in high income democracies our results suggest that the occupational characteristics of routineness and offshorability are important determinants of trade preferences offering additional understanding of the sources of protectionist sentiment even after controlling for labor market characteristics suggested by conventional wisdom

does society prefer small innovation abstract in this paper we show how the size of innovation can affect the incentive for cooperative r d and social welfare when cost difference between large and small innovations is not sufficiently large then social welfare can be more under small innovation compared to large innovation however the innovating firm always prefers large innovation

oligarchic family control social economic outcomes and the quality of government wealthy families as opposed to small public shareholders characterize ownership of the large corporate sectors of many countries around the world this paper shows that greater oligarchic family control over large corporations is associated with worse social economic outcomes it also correlates with more bureaucratic and more interventionist governments and less developed financial markets further tests show that red tape price controls and the lack of shareholder rights protection are the paramount factors relating to the extent of family control of large firms these results are broadly consistent with olson and others who argue that economically entrenched wealthy insiders pursue rent seeking activities to preserve the status quo and that this increases corruption and impedes growth

does privatization remove restrictive working practices evidence from uk establishments this study investigates the links between privatization and changes in working practices using data from the uk 1990 workplace employees relations survey privatization raises the probability of an establishment of experiencing reduced job demarcation and or increased flexibility in the use of the workforce by managers after exploration no clear association is found between ownership and the level of restrictive working practices

why haven t developing countries privatized deeper and faster abstract despite a decade of privatization in the developing world the vast majority of state owned enterprise soe assets continue to be in government hands bureaucrats in business world bank 1995 correctly identifies politics as one reason for the slow pace of privatization but it underestimates the role of institutional and economic constraints success stories of privitization are rare in low income countries and the long term promise of privatization in sectors posing regulatory complications remains to be established countries in crisis may reform soes quickly and deeply despite these uncertainties but others may opt for gradual reform which need not be altogether bad if speedy privatization results in poorly conceived schemes the cure can be worse than the illness finally bureaucrats are likely to stay in business for years to come and therefore it is important to improve their effectiveness in the roles they are unlikely to shed in the future a market friendly approach to soe reform need not be government un friendly

tax smoothing and the cross country pattern of privatization summary privatization generally enhances firm level efficiency the impact of privatization on fiscal efficiency has however been overlooked using the tax smoothing ideas articulated by r barro 1979 on the determination of the public debt journal of political economy 87 940 971 and by h bohn 1990 tax smoothing with financial instruments american economic review 80 1217 1230 we argue that privatization may have an important impact on the welfare losses associated with tax collection this impact can either enhance or erode the efficiency of taxation we hypothesize that countries that benefit in terms of fiscal efficiency will privatize aggressively while countries that enjoy fiscal benefits as a result of state ownership will show little interest in privatization statistical tests are conducted that provide considerable support for the hypothesis

public enterprise reform privatization and the world bank abstract the objectives of this paper are i to review the importance and performance of public enterprises in developing countries ii to examine the questions of whether and why performance improvements should result from privatization and iii to discuss in light of the preceding analysis the approach used by the world bank concerning privatization

privatization public offerings and political objectives this paper empirically analyses the political and economic objectives underlying privatization on the stock market particularly the factors of sips underpricing are explained and the study analyses whether the change of political parties in government play a role on the issue the paper has two main findings first larger initial returns occurred in the early stages of privatization second the change of government from left wing to right wing did not lead to significantly higher levels of underpricing the results show that governments are quite pragmatic with respect to underpricing maximizing proceeds from sips shows to be more important than ideological differences between parties in government

residual state ownership policy stability and financial performance following strategic decisions by privatizing telecoms we question previous research assuming that privatizing firm performance generally benefits from decreasing state ownership and the passage of time both of which purportedly align principal agent incentives promoting organizational decision making that increases shareholder value when state ownership shifts from majority and controlling to minority and non controlling the performance impact may be positive in the short run particularly where there is instability in the local investment policy environment consistent with this proposition we develop and test hypotheses derived from a minority and non controlling or residual state ownership framework grounded in credible privatization and institutional theory we propose that 1 residual state ownership positively affects shareholder returns after strategic decisions by privatizing firms because it signals state support for managerial initiatives 2 the passage of time since initial privatization negatively affects shareholder returns after strategic decisions by privatizing firms because initial undertakings in support of the privatizing firm are reversed and 3 home country investment policy stability moderates these two effects greater stability obviates the need for residual state ownership and slows policy reversals over time we find empirical support for our residual state ownership framework in event study analyses of cumulative abnormal returns cars associated with 196 major investments announced from 1986 to 2001 by 15 privatizing telecoms from around the world cars are positive at 5 25 state ownership levels but turn negative at higher state ownership levels cars turn sharply negative within 1 2 years from initial privatization dates increasing policy stability diminishes positive ownership and negative time effects on cars results confirm the potential supporting role that residual state ownership can play in enhancing strategic decision making and financial performance by privatizing firms particularly where there is instability in the home country investment policy environment

who wants to globalize consumer tastes and labor markets in a theory of trade policy beliefs although the allure of consumption is the engine of globalization political economists have tended to ignore varying consumer tastes as a potential source of beliefs about trade policy this article develops a theory of trade policy preferences that adds the notion of varying consumer tastes to the standard labor market application of the heckscher ohlin trade model the theory which can explain trade preferences both across individuals and countries is supported by an empirical analysis of survey data from 41 nations heavy consumers of exportables are found to be more protectionist than heavy consumers of imports and import competing goods moreover citizens in countries with expensive tradable goods see trade liberalization as a remedy to the rents they pay for protectionism other findings also support the more conventional labor market side of the heckscher ohlin model

black hole tariffs and endogenous policy theory political economy in general equilibrium preface acknowledgments list of results 1 a preview of the results 2 endogenous policy theory a diagrammatic approach part i endogenous policy theory with specific factors the theory of industry tariffs in partial equilibrium 3 the probabilistic voting model of political efficiency and powerless politicians 4 endogenous lobbying theory and the contribution specialization theorem 5 endogenous tariff theory 6 the power function model of endogenous industry lobbying 7 three simple tests of the stolper samuelson theorem 8 the invisible foot and the waste of nations lawyers as negative externalities part ii endogenous policy theory in general equilibrium a long run theory of national tariff levels 9 the 2 x 2 x 2 x 2 model of endogenous redistribution theory 10 a prisoner s dilemma theory of endogenous protection the leontief model 11 the compensation effect and the multiple equilibrium trap 12 increasing returns to politics and factor endowments economic development and brazilian vitality versus the indian disease 13 endogenous protection in the united states 1900 88 14 a cobb douglas model 15 black hole tariffs 16 the endowment effect cross national evidence on endogenous tariffs part ii postscript 17 the senile industry argument for protection 18 optimal obfuscation and the theory of the second worst the politically efficient policy mathematical appendices references author index subject index

learning to love globalization education and individual attitudes toward international trade recent studies of public attitudes toward trade have converged on one central finding support for trade restrictions is highest among respondents with the lowest levels of education this has been interpreted as strong support for the stolper samuelson theorem the classic economic treatment of the income effects of trade that predicts that trade openness benefits those owning factors of production with which their economy is relatively well endowed those with skills in the advanced economies while hurting others low skilled workers we reexamine the available survey data showing that the impact of education on attitudes toward trade is almost identical among respondents in the active labor force and those who are not even those who are retired we also find that while individuals with college level educations are far more likely to favor trade openness than others other types of education have no significant effects on attitudes and some actually reduce the support for trade even though they clearly contribute to skill acquisition combined these results strongly suggest that the effects of education on individual trade preferences are not primarily a product of distributional concerns linked to job skills we suggest that exposure to economic ideas and information among college educated individuals plays a key role in shaping attitudes toward trade and globalization this is not to say that distributional issues are not important in shaping attitudes toward trade just that they are not clearly manifest in the simple broad association between education levels and support for free trade the authors would like to thank james alt jeffry frieden robert lawrence dani rodrik ron rogowski ken scheve andy baker peter gourevitch and beth simmons for helpful comments on earlier drafts

inequity aversion and the international distribution of trade protection one important puzzle in international political economy is why lower earning and less skilled intensive industries tend to receive relatively high levels of trade protection this pattern of protection holds across countries with vastly different economic and political characteristics and is not well accounted for in existing political economy models we propose and model one possible explanation that individual inequity aversion leads to systematic differences in support for trade protection across industries we conduct original survey experiments in china and the united states and provide strong evidence that individual policy opinions about sector specific trade protection depend on the earnings of workers in the sector we also present structural estimates that advantageous and disadvantageous inequality influence support for trade protection in the two countries o ne important puzzle in international political economy is why lower earning and less skilled intensive industries tend to receive relatively high levels of trade protection because this pattern of protection holds even in low income countries for which lower earning and less skilled intensive industries are likely to be comparative advantage sectors it is arguably at odds with the common empirical finding that declining comparative disadvantage industries are more likely to receive protection moreover it is at odds with most theoretical political economy models which tend to either predict consistent with most empirical work that losing sectors from international trade receive more protection or that expanding sectors that gain from greater trade should enjoy more government support existing accounts are generally good at explaining support for winners or for losers they are not however good at

the government as a shareholder a case from the united states we study a sample of u s corporations in which the federal government held 35 100 percent of the outstanding common stock for between 1 and 23 years during and following world war ii we find that although the firms experienced abnormally high turnover among corporate board members the tenure of senior management was relatively stable moreover the performance of the government owned companies was not significantly different than that of private sector firms in the same industry hence the interim government custodianship of the firms in our case does not have the effects normally attributed to government ownership

through a glass and darkly attitudes toward international trade and the curious effects of issue framing are most voters opposed to globalization a growing body of empiri cal research using data from available surveys of public opinion suggests that anti globalization sentiments are strong especially among blue collar workers this article reports the findings from a survey experiment aimed at measuring the impact of issue framing on individuals stated attitudes toward international trade respondents given an antitrade introduction to the survey question linking trade to the possibility of job losses were 17 percent less likely to favor increasing trade with other countries than were those asked the same question without any introduction at all curiously respondents who were given a protrade introduction to the question suggesting that trade can lead to lower prices for consumers were not more likely to express sup port for trade than those who received no introduction in addition the responses of less educated individuals were more sensitive to framing effects than those of highly educated individuals without measuring and taking these types of framing effects into account opinion surveys offer unreliable guides to gauging the extent and dis tribution of opposition to trade among voters results from a second experiment reveal that knowledge of the endorsement of trade openness by economists mitigates framing effects and raises overall support for trade liberalization by a substantial degree

establishing property rights establishing secure property rights in transition economies amounts to solving two problems inefficiency structures of control rights over assets and poor contract enforcement politicians and bureaucrats still wield excessive control over assets which results in inefficient underinvestment by entrepreneurs corruption is one way of getting around political control but the drawbacks are considerable particularly the limited enforceability of corruption contracts more workable strategies for establishing property rights in transition economies are giving equity to the bureaucrats and other parties that have control reforming the civil service and removing bureaucratic control rights through privatization russia s experience shows how privatization combined with equity incentives for enterprise insiders transfers control rights from the bureaucrats and stimulates political and economic pressures to protect private property rights

share issue privatizations as financial means to political and economic ends abstract this study examines how political and economic factors affect the offer price share allocation and other terms governments choose when they privatize state owned enterprises via a public share offering using a 59 country sample of 630 share issue privatizations sips with total proceeds of over 446 billion during the period 1977 1997 we find that governments consistently underprice sip offers tilt their share allocation patterns to favour domestic investors impose control restrictions on privatized firms and typically use fixed price offers rather than book building or competitive tender offers all to further political and economic policy objectives

cooperative and noncooperative r d in an oligopoly with spillovers this paper examines the positive and normative effects of cooperative r d whereby member firms commit themselves to the joint profit maximizing level of r d in a precompetitive stage but remain fierce competitors in the product market vis a vis noncooperative r d socially first best r d and socially second best r d in the presence of sufficiently large r d spillovers neither noncooperative nor cooperative equilibria achieve even second best r d levels in the absence of spillover effects however while the cooperative r d level remains socially insufficient the noncooperative level may overshoot first and second best levels of r d copyright 1992 by american economic association

the financial and operating performance of newly privatized firms an international empirical analysis this study compares the pre and postprivatization financial and operating performance of 61 companies from 18 countries and 32 industries that experience full or partial privatization through public share offerings during the period 1961 to 1990 our results document strong performance improvements achieved surprisingly without sacrificing employment security specifically after being privatized firms increase real sales become more profitable increase their capital investment spending improve their operating efficiency and increase their work forces furthermore these companies significantly lower their debt levels and increase dividend payout finally we document significant changes in the size and composition of corporate boards of directors after privatization the last fifteen years have witnessed a significant global shift away from state socialism towards entrepreneurial capitalism one of the most important and visible aspects of this trend has been the enthusiasm with which governments of all political persuasions have sold their state owned enterprises soes to private investors in hopes that the generally unsatisfactory economic performance of these firms can be improved by the discipline of private ownership this denationalization process given its current title of privatization by the conservative government of margaret thatcher in

interactions between investment timing and management effort under asymmetric information costs and benefits of privatized firms abstract in this paper we examine the interactions between investment timing and management effort in the presence of asymmetric information between the owner and the manager where the manager has an informational advantage we find that investment timing is later under asymmetric information than under full information implying a decrease in the value of equity option however in order to minimize any distortion under underinvestment management effort is greater under asymmetric information than under full information we show that there are trade offs in the efficiencies of investment timing and management effort under asymmetric information these results fit well with the findings of past empirical studies concerning the costs and benefits of privatized firms

lobbying and agricultural trade policy in the united states the authors study whether political campaign contributions influence agricultural protection in the united states in the manner suggested by the political economy model of grossman and helpman 1994 this is the first attempt to test this model using agricultural data the authors test the model using a detailed cross sectional data set of agricultural protection subsidies and political action committee pac contributions in the late 1990s the model is qualitatively affirmed by the data they make a novel attempt to solve a puzzle about the model s quantitative implications also found in recent studies this solution makes the simple model consistent with the complicated decisionmaking process in real world government the results imply the underpinnings of a political economy equilibrium that will be hard to dislodge

how elastic are preferences for redistribution evidence from randomized survey experiments we analyze randomized online survey experiments providing interactive customized information on us income inequality the link between top income tax rates and economic growth and the estate tax the treatment has large effects on views about inequality but only slightly moves tax and transfer policy preferences an exception is the estate tax informing respondents of the small share of decedents who pay it doubles support for it the small effects for all other policies can be partially explained by respondents low trust in government and a disconnect between concerns about social issues and the public policies meant to address them jel d31 d72 h23 h24

lessons from privatization in britain abstract the process of privatizing most of britain s major public enterprises yields interesting conclusions on the three related issues 1 a problem of policy assignment arose in the use of privatization and liberalization to achieve both allocative and productive efficiency 2 evidence on the behavior of the public enterprises is consistent with an organizational model of the relevant principal agent relationships predicting certain types of slack absorption 3 the privatization process entailed policy choices that bear on their future productive efficiency effectiveness of monitoring by the market for corporate control and allocative efficiency provision for regulation

new data base on state owned enterprises privatization of state owned assets was a central economic reform of the 1980s and 1990s lack of data has made it impossible to judge the extent to which privatization has diminished the importance of state ownership in the economy or changed the performance of state owned enterprises this article introduces a new data base on state owned enterprises the first since the mid 1980s which partly fills this information gap the bureaucrats in business data base provides time series data for up to eighty eight countries on the share of state enterprises in the overall economy investment employment and internal and external credit as well as their overall surplus or deficit and the size of transfers to and from national treasuries the article presents the rationale for the data base describes its seven measures of state enterprise size and performance and explores possible uses of the information

who lobbies whom special interest politics under alternative electoral systems why do some interest groups lobby politicians and others lobby bureaucrats we theorize lobbying venue choices and intensityasafunctionofcontractenforceabilitywithpolicymakers politicians orbureaucrats wearguethatorganizational structures of interest groups in particular whether they are centralized or decentralized substantially affect their lobbying strategies because they are associated with different ability to monitor and enforce contracts with policy makers and punish them when they fail we further demonstrate that the effect of centralized versus decentralized structure on venue choices is conditional on the types of electoral system majoritarian semiproportional single nontransferable vote sntv or proportional representation systems we test this argument using longitudinal survey data on lobbying which span two decades and cover around 250 interest groups in various sectors and issue areas in japan the results lend strong support to our argument about contract enforceability under alternative electoral systems

on the existence of an optimal capital structure theory and evidence one of the most contentious issues in the theory of finance during the past quarter century has been the theory of capital structure the geneses of this controversy were the seminal contributions by modigliani and miller 18 19 the general academic view by the mid 1970s although not a consensus was that the optimal capital structure involves balancing the tax advantage of debt against the present value of bankruptcy costs no sooner did this general view become prevalent in the profession than miller 16 presented a new challenge by showing that under certain conditions the tax advantage of debt financing at the firm level is exactly offset by the tax disadvantage of debt at the personal level since then there has developed a burgeoning theoretical literature attempting to reconcile miller s model with the balancing theory of optimal capital structure e g deangelo and masulis 5 kim 12 and modigliani 17 the general result of this work is that if there are significant leverage related costs such as bankruptcy costs agency costs of debt and loss of non debt tax shields and if the income from equity is untaxed then the marginal bondholder s tax rate will be less than the corporate rate and there will be a positive net tax advantage to corporate debt financing the firm s optimal capital structure will involve the trade off between the tax advantage of debt and various leverage related costs the upshot of these extensions of miller s model is the recognition that the existence of an optimal capital structure is essentially an empirical issue as to whether or not the various leverage related costs are economically significant enough to influence the costs of corporate borrowing the miller model and its theoretical extensions have inspired several timeseries studies which provide evidence on the existence of leverage related costs trczinka 28 reports that from examining differences in average yields between taxable corporate bonds and tax exempt municipal bonds one cannot reject the miller hypothesis that the marginal bondholder s tax rate is not different from the corporate tax rate however trczinka is careful to point out that this finding does not necessarily imply that there is no tax advantage of corporate debt if the personal tax rate on equity is positive indeed buser and hess 1 using a longer time series of data and more sophisticated econometric techniques estimate that the average effective personal tax rate on equity is statistically positive and is not of a trivial magnitude more importantly they document evidence that is consistent with the existence of significant leverage related costs in the economy

privatization in the united kingdom lessons from experience abstract although the reasons for privatization vary across countries in the united kingdom as in other countries it also reflects a renewed belief in market forces the search for policy options that emerges from this renewal however needs to be tempered by an understanding of market as well as regulatory failures although problems facing government enterprises in developed and developing countries may differ the objective of privatization should be to reconstruct these enterprises so as to create conditions that make private sector operations effective and efficient at the same time one should recognize that this may require continued public sector activity in the sector

state owned and privately owned firms an empirical analysis of profitability leverage and labor intensity for some it is an article of faith that governmentowned firms must be less efficient or at least less profitable than privately owned firms maxim boycko et al 1996 argue that politicians cause government owned firms to employ excess labor inputs anne o krueger 1990 suggests that such firms may be pressured to hire politically connected people rather than those best qualified to perform desired tasks more generally government owned firms are thought to forgo maximum profit in the pursuit of social and political objectives such as wealth redistribution in addition the residual cash flow claims of these firms are not readily transferable like the shares of a private corporation this impairs residual claimant incentives to monitor managers and ultimately degrades firm performance as a consequence one expects government owned firms to be technically less efficient and therefore less profitable than private firms the implication is that in competitive markets without significant externalities private ownership is the superior organizational form the view that government firms are inherently less efficient than private ones however remains controversial among economists john vickers and george yarrow 1991 among others point out that agency problems arise in private firms as well as public ones in most large private corporations managers own little of the stock because monitoring managers is costly a divergence arises between their objectives and those of private shareholders private shareholders typically hold a small stake in any one firm and it may not pay any shareholder to bear the cost of monitoring management it follows from this discussion that whether government firms are more or less efficient than private firms is primarily an empirical issue to date the body of empirical evidence is mixed in this paper we report further empirical evidence on the relative efficiency of public and private enterprises we build on previous work by studying larger samples over longer time periods and by allowing for additional factors that influence firm performance in particular our analysis controls for time series variation in the general level of economic activity that may otherwise confound performance comparisons between government and private firms 2 we approach the issue in two different ways first using accounting numbers we conduct a large sample cross sectional comparison of government owned and privately owned corporations this comparison is similar in design to that of boardman and vining 1989 but our sample is three times the size of theirs and includes three

explaining mass support for agricultural protectionism evidence from a survey experiment during the global recession why are citizens in advanced industrialized countries willing to accept high prices for agricultural products conventional wisdom suggests that agricul tural interests secure government protection because producers are concentrated and better politically organized than diffused consumers due to its focus on pro ducer capacity for collective action however the literature fails to account for the high levels of mass support for agricultural protectionism in advanced industrial ized nations this article presents new evidence from a survey experiment in japan conducted during the recent global recession december 2008 that accounts for this puzzle using randomly assigned visual stimuli the experiment activates respon dents identification with either producer or consumer interests and proceeds to ask attitudinal questions regarding food imports the results suggest that consumer priming has no reductive or additive effects on the respondents support for liberal izing food imports surprisingly producer priming increases respondents opposi tion to food import particularly among those who fear future job insecurity we further disentangle the puzzling finding that consumers think like producers on the issue of food import along two mechanisms sympathy for farmers and projec tion of their own job insecurity the results lend strong support to the projection hypothesis

optimal fiscal and monetary policy in an economy without capital abstract this paper is concerned with the structure and time consistency of optimal fiscal and monetary policy in an economy without capital in a dynamic context optimal taxation means distributing tax distortions over time in a welfare maximizing way for a barter economy our main finding is that with debt commitments of sufficiently rich maturity structure an optimal policy if one exists is time consistent in a monetary economy the idea of optimal taxation must be broadened to include an inflation tax and we find that time consistency does not carry over an optimal inflation tax requires commitment by rules in a sense that has no counterpart in the dynamic theory of ordinary excise taxes the reason time consistency fails in a monetary economy is that nominal assets should from a welfare maximizing point of view always be taxed away via an immediate inflation in a kind of capital levy this emerges as a new possibility when money is introduced into an economy without capital

a re examination of china s share issue privatization abstract previous studies show that in contrast to evidence that share issue privatization sip in most other countries have improved firm profitability china s sip of the 1990s had no such effect we argue that the main reason for the failure of china s sip is likely to have been the weak institutional environment in place at that time we examine china s sip in a more recent period in which the institutional environment was greatly improved using a matching sample method we find that sip firms continued to experience negative post sip profitability changes in our sample period however their performance decline was significantly less than that of their matched non sip soes we also find that the introduction of the independent director rule helped to improve firm performance our results reconcile the findings of the sip effect in china with international evidence and illustrate the importance of a developed capital market to ensuring the success of privatization schemes

incentives for cooperative and non cooperative r and d in duopoly abstract this paper tries to explain why duopolistic firms would like to enter cooperative r and d venture even when they would act non cooperatively in the product market we show that both very high and very low probabilities of success in r and d can induce firms to go for r and d joint ventures this research highlights the modus operandi for cooperative research even without and spillover of individual r and d and or with a reasonably low sunk cost of r and d

variety growth and world welfare economists since john richard hicks have known that one of the principal means if not the principal means through which countries benefit from international trade is by the expansion of varieties the seminal work of paul r krugman 1979 brought the study of varieties into sharp focus by presenting a simple generalequilibrium model in which countries gain from trade through the import of new varieties since then economists have been hampered in their ability to quantify the impact of new varieties on national welfare by the econometric and data hurdles that need to be surmounted in this paper we document some stylized facts about the growth in global varieties which suggest that there may have been substantial welfare gains through the import of new varieties moreover we calculate the impact of increased variety on import prices and find that conventional measures of import price inflation may be dramatically biased upward classical international trade theory postulates that the elimination of trade barriers improves welfare by reducing the wedge between domestic and import prices as well as the ensuing deadweight loss an entirely different reason for the gains from trade arises from models of monopolistic competition if consumers value variety and countries cannot produce all varieties due to a fixed cost in the production of each variety countries stand to gain from trade because it expands the set of available varieties in these models the gains hinge crucially on a number of parameters and variables the first is the elasticity of substitution among varieties if varieties are highly substitutable as might be true for varieties of gasoline then increasing the number of varieties is unlikely to have much of an effect on prices and welfare second quality variation across varieties may matter presumably most americans care more about having access to french red wine than to japanese red wine finally import quantities matter as ceteris paribus one cares more about variety growth in big sectors than in small sectors in broda and weinstein 2004 we carefully estimate the impact of increased variety in the united states over the period from 1972 to 2001 using the most disaggregated import data available we document that the number of varieties imported by the united states defined as the number of import categories multiplied by the average number of source countries for each category quadrupled about half of this increase was due to increases in the number of categories and half due to a doubling of the number of countries from which the united states imported each good measuring the impact of this increase on u s import prices and welfare is a complex process that we will only discuss briefly here essentially we used robert c feenstra s 1994 methodology to estimate 30 000 elasticities and then construct an aggregate price index that is robust to common changes in quality variation the arbitrary splitting of categories the introduction of new goods and a host of other data problems after reconstructing the u s import price index we found that the price of u s imports has been falling at a rate 1 2 percent per year faster than one would have thought without taking new varieties into account to get some sense of the enormity of this bias consider that the impact of quality adjustments on the consumer price index is estimated to be 0 6 percent per year using this adjusted import price index we estimate the impact of new imported varieties on broda research department federal reserve bank of new york 33 liberty street new york ny 10045 weinstein economics department columbia university 420 w 118th street new york ny 10027 and nber we thank joshua greenfield for excellent research assistance we thank robert feenstra and peter klenow for excellent comments 1 the extension of trade does not primarily imply more goods the variety of goods available is also increased with all the widening of life that that entails there can be little doubt that the main advantage that will accrue to those with whom our merchants are trading is a gain of precisely this kind this is a gain which quantitative economic history which works with index numbers of real income is ill fitted to measure or even to describe hicks 1969 p 56

compensation and wealth transfers in the french nationalizations 1981 1982 abstract this paper studies the price reaction of french common stocks to the recent nationalization program and estimates the value that nationalized firms would have had if the nationalization program had not occurred it finds that expropriated holders of the nationalized portfolio received a government legislated takeover premium of about 20 percent premiums received for individual firms ranged from 3 to 44 percent industrial firm shareholders benefited most from the program the conditions surrounding the premium dispersion raise questions about equal treatment among expropriated shareholders

ownership versus competition efficiency in public enterprise certainly the introduction of product market competition into potentially competitive or at least contestable markets can improve performance to take just one example morrison and whinston 1986 1986 estimate that even in the imperfectly contestable u s airline industry the annual u s welfare gains from deregulation have been around 6 billion

earnings management behaviors under different monitoring mechanisms the case of islamic and conventional banks abstract we investigate the impact of organizational religiosity on the earnings quality of listed banks in the middle east and north africa region we analyze islamic banking institutions which operate within strict religious norms and extended accountability constraints and compare them with their conventional counterparts during 2008 2013 we find that islamic banks are less likely to manage earnings and that they adopt more conservative accounting policies based on these findings we argue that religious norms and moral accountability constraints in these organizations have a significant impact on financial reporting quality and agency costs which have implications for both regulators and market participants

politicians and the ipo decision the impact of impending political promotions on ipo activity in china abstract this paper shows that incentives created by the impending turnover of local politicians can accelerate the pace of initial public offering ipo activity in certain politicized environments focusing on china we exploit a research setting where politicians are rewarded for capital market development firms rely on political connections for access to capital rent seeking behavior is rampant and the objectives of the state might not be to maximize capital market efficiency we find that the rate of exchange eligible firms engaging in an ipo temporarily increases in advance of impending political promotion events this effect holds for both state owned and non state owned entities for state owned firms the effect is strongest in those provinces where the politicians are more likely to be rewarded for market development activity for non state owned firms the temporary increase in ipo activity appears to be rationally opportunistic in nature with the effect stronger around events more likely to disrupt the firms political connections promotion period ipos underperform non promotion period ipos in terms of both future financial performance and long run stock returns have controlling shareholders who retain a larger fraction of the company and are more likely to divert proceeds away from their intended use after the offering

assessing comparative efficiency of the state owned mixed and private sectors in indian industry this paper evaluates performance differences between government owned mixed sector and private sector enterprises in india for the period 1973 1974 to 1988 1989 the results establish that enterprises owned by the central government and state governments are less efficient than mixed or private sector enterprises while mixed sector enterprises are less efficient than those in the private sector the results contradict extant evidence finding no performance differences between government owned and private firms in india there have however been inter temporal efficiency gains for the sector as a whole perhaps resulting from reforms undertaken towards improving government owned enterprises performance

privatization benefits in eastern europe abstract we document changes in the performance of over 6000 privatized and state owned manufacturing enterprises in seven eastern european countries over the initial transition period we find that privatization is associated with significant increases in sales revenues and labor productivity and to a lesser extent with fewer job losses the positive effect of privatization is stronger in economic magnitude and statistical significance as the time elapsed since privatization increases enterprises privatized for less than 2 years have labor productivity growth similar to that of state owned enterprises in contrast enterprises privatized for 3 or more years significantly outperform state owned enterprises the results are robust to the use of alternative econometric specifications fixed effects cluster effects and random effects and survive in six of the seven individual country samples the exceptions being hungary for sales growth and romania for labor productivity growth

privatization in theory and practice privatization george yarrow this paper examines the theoretical and empirical case for private versus public ownership privatization usually leads managers to place greater emphasis on the pursuit of profits however whether this is beneficial to society depends on the trade off between possible market failures due to a lack of competition and deficiencies in government control of public firms the competitive and regulatory environment is more important than the question of ownership per se in competitive markets there is a presumption in favour of private ownership where there is a natural monopoly vigorous regulatory action is required the evidence suggests that privatization has led to improved performance by firms such as the national freight corporation and cable and wireless which operate in a relatively competitive environment the benefits are less clear in the case of firms like bp britoil and british aerospace however the most worrying case is that of british telecom and the projected privatization of british gas where little thought has been given to limiting the abuse of monopoly power rather the regulatory environment has been tailored to the needs of the existing management and to ensuring a successful share flotation privatization is also advanced as a weapon for reducing trade union power encouraging wider share ownership redistributing wealth and improving the public finances however there are other policy instruments better suited to achieving these objectives the existing privatization programme has not led to a marked widening of share ownership and has resulted in windfall gains to a small group of investors at the expense of taxpayers in general

the financial and operating performance of privatized firms during the 1990s this study compares the pre and postprivatization financial and operating performance of 85 companies from 28 industrialized countries that were privatized through public share offerings for the period from 1990 through 1996 we document significant increases in profitability output operating efficiency and dividend payments and significant decreases in leverage ratios for our full sample of firms after privatization and for most subsamples examined capital expenditures increase significantly in absolute terms but not relative to sales employment declines but insignificantly combined with results from two previous directly comparable studies these findings strongly suggest that privatization yields significant performance improvements during the past two decades the privatization of state owned enterprises has moved from being a radical almost desperate policy initiative of the thatcher government in britain to being an accepted economic policy for governments of all ideological stripes according to gibbon 1998 860 billion has been raised by governments worldwide through privatizations with the bulk of this total coming since 1987 and at least one commentator roche 1996 predicts that no less than 6 trillion will be raised through privatizations over the next two decades in 1997 alone sales of public enterprises totaled a record 161 billion worldwide with more than 110 billion of the total coming during the second half of the year and 1998 s total of almost 140 billion indicates that the pace shows no sign of slackening as we approach a new millennium

productivity growth and firm ownership an analytical and empirical investigation we focus on the effect of state versus private ownership on the rates of firm specific productivity growth and cost decline by developing a model of endogenous firm specific productivity growth and testing its implications against panel data on 23 international airlines of varying levels of state ownership over the period 1973 83 our model and empirical results show that state ownership can lower the long run annual rate of productivity growth or cost decline but not necessarily their levels in the short run observed level differences in productive efficiency across private and state owned firms may thus be a function of the age distribution of the firms being compared these results appear to be independent of whether the firms operate under apparently more or less competitive or regulated markets and whether they differ in production scales the analysis offers new insights concerning the recent trend toward privatizing state owned enterprises that has been observed in many countries

on a non cooperative theory of technology transfer abstract this paper shows that it might be profitable for a firm with advanced technology to sell the knowledge to a competing firm with less efficient technology and still remain in the business a non corperative equilibrium with technology transfer may pareto dominate the initial equilibrium without technology transfer in this paper it is shown that technology agreement is likely to occur between firms which are reasonably close in terms of their initial technologies such an equilibrium is an interesting possibility in the absence of credibly sustainable collusive outcomes

the performance of privatized firms in the czech republic abstract with the growing importance of privatizations as a part of government policy most empirical studies of these privatizations conclude that firm performance immediately improves following privatization privatization has been the most important part of the transition from the centrally planned economies of central and eastern europe and has a larger impact on those economies than privatizations in other countries however few studies have looked at the performance of firms following mass privatization this study uses 453 separate firms 101 firms privatized in both waves for a total of 554 observations in the first and second waves of czech voucher privatization using methodology from previous studies we find that while the overall effects from privatization are positive the effects vary by privatization wave size and industry firms privatized in the first wave performed worse decline in performance following privatization than firms privatized in the second wave we also fail to find ownership concentration or debt as an important factor in restructuring the firm i believe that the results are consistent with two hypotheses first economic and political structure surrounding the privatization waves plays an important part in the success of privatization stable environments both political and economic help privatized firms restructure and improve operating performance as well as attract foreign investors and capital even in less developed countries but in transitional economies undergoing mass privatization in rapidly changing and developing economic and political environments hinder firms from restructuring and improving performance following privatization results are also consistent with the hypothesis that firms with a longer preparation period prior to privatization an implicit seasoning improve performance following privatization

full privatization through controlling rights transfer in china the extent of its success this article investigates the effect of the second step of privatization in china which is full privatization through controlling rights transfer after share issue partial privatization it finds that fully privatized firms perform worse than state controlled enterprises expropriation by private block shareholders is greater than that by state block shareholders furthermore increase in expropriation is negatively related to performance change the results suggest that full privatization may not yield the expected efficiency gains in transition economies with weak legal system they also emphasize the importance of preventing private block shareholders from exploiting minority shareholders in the process of full privatization

electoral competition and agricultural support in oecd countries agricultural trade protectionism in developed countries remains a politically charged issue yet few studies have attempted to explain the political dynamics behind this important trade issue we consider agricultural subsidies as a type of distributive policy that targets the agricultural sector at the expense of consumers and taxpayers based on cox 1987 1990 and myerson 1993 we argue that electoral systems that encourage politicians to appeal to a narrow constituency tend to have a higher level of agricultural support we test this theoretical hypothesis using oecd agricultural support data disaggregated by commodity and country a cross classified multilevel model is employed to account for complex variation of agricultural support across countries commodities and time our empirical results show that electoral systems that encourage politicians to target narrow broad constituencies are associated with relatively high low levels of agricultural subsidies

a referendum on trade theory voting on free trade in costa rica research on mass opinion in international political economy overwhelmingly relies on survey data this poses problems of external validity especially for a frequently low salience issue such as trade policy to examine whether survey findings about attitudes toward economic openness apply outside of surveys this note considers patterns of voting in the 2007 costa rican plebiscite about joining the central american free trade area several extant theories appear to explain voting patterns but the results are less in line with traditional economic models based on locally important economic sectors

majoritarian electoral systems and consumer power price level evidence from the oecd countries a straightforward extension of the standard stigler peltzman model of regulation coupled with a taagepera shugart analysis of electoral system effects suggests a that the greater seat vote elasticities of majoritarian electoral systems will tilt policy in favor of consumers while propor tional systems should strengthen producers and b that the pro con sumer bias of majoritarian systems should be manifested in systemati cally lower prices empirical tests controlling for the structural determi nants of national price levels estab lished in the earlier law of one price literature establish majoritarian elec toral systems as a significant and robust predictor lowering national price levels in the mean oecd coun

regulation competition and liberalization in many countries throughout the world regulators are struggling to determine whether and how to introduce competition into regulated industries this essay examines the complexities involved in the liberalization process while stressing the importance of case specific analyses this essay distinguishes liberalization policies that generally are procompetitive from corresponding anticompetitive liberalization policies

privatization and the economic performance of irish sugar greencore as one of ireland s largest agribusiness companies the irish sugar company played a key role in the country s economic development in the twentieth century the company was privatized in 1991 under the new name greencore and has since transformed from a largely commodity based agribusiness into an international convenience food company this article analyses the financial and economic performance of the company in the 10 years before and after privatization it finds that the change from public to private ownership was not strongly associated with improved financial performance and productivity as the company had experienced rapid growth and improvement in the pre privatization period these findings run counter to perspectives such as public choice theory that suggest a positive relationship between privatization and company performance performance in the post privatization period was strongly influenced by greater exposure to market forces in the company s expanding food division however it is sur

price and productivity change following deregulation the u s experience no real world market is likely to be perfectly contestable anymore than it is to be perfectly competitive yet like its predecessor the contestability benchmark proves highly useful as a framework for evaluating policies and outcomes under the contestability framework entry and price regulation is deemed inappropriate in industries which do not have system wide natural monopoly characteristics on this criterion brokerage airline trucking long distance telephone and terminal equipment should not be regulated true these industries may be characterised by some elements of scale economy such as economies of vehicle size so that at some level city pair routes only a few firms may serve but industry performance need not suffer in such an unregulated environment impediments to entry and exit not concentration or scale of operations may be the primary source of prices that are not welfare optimal even in the presence of natural monopoly characteristics it is important to isolate those markets which are not yet structurally competitive as in the case of coal shipments over which the railroads are judged to possess market dominance or in local telephone service it can be argued that the latter should continue to be overseen by regulators while markets which are controlled by competitive forces deriving from actual or potential competition or taking other indirect but effective forms should be free from traditional regulation thus unlike privatisation policy in the united kingdom described in the companion article by kay and thompson i985 us deregulatory policy can be construed as having a coherent rationale the nature and extent of deregulation match remarkably well with the policy prescription of the theory this paper analyses the consequences that have emerged under deregulation in terms of the following behavioural properties predicted by multi product competition and contestability theory a variety of products will emerge each of which will yield zero economic profit the revenues from any subset of the products must exceed the incremental costs of those products so that no cross subsidy can exist prices for each product will equal or exceed marginal costs and an equilibrium market structure will minimise costs for the industry see baumol

on the virtues of privatization when government is benevolent abstract this paper shows that privatizing a public firm can be welfare improving even if the government is a welfare maximizer we consider a setup where the firm s owner a profit maximizing entrepreneur or a benevolent government employs a manager who can invent and implement an innovative production technology wage arrangements are optimal given the verifiable information all parties behave rationally and the information structure is the same in both governance modes nevertheless privatization turns out to be preferable in a wide variety of situations government ownership yields the first best if producing under the old technology is not viable

innovation market structure and welfare many writers subscribe to joseph schumpeter s view that while perfectly competitive firms allocate resources efficiently in a static sense they perform poorly when it comes to innovation from this point of view the optimal form of market structure is unlikely to be perfect competition but some other type of dynamic competition which includes significant elements of monopoly recently considerable effort has been focused on modelling schumpeter s notion of competition perhaps best exemplified by the 1980 work of partha dasgupta and joseph stiglitz hereafter d s 2 this approach views free entry to the rd see nelson and winter 1977 3readers will recognize a similarity of this approach with the notion of contestable markets discussed most recently by william baumol 1982 and by baumnol john panzar and robert willig 1982 for an interesting comparison of the schumpeterian with the marxian notion of competition see john elliott 1980 4this was noted for example by robert wilson 1975 5in such industries the long term gains from dynamically efficient innovation become of paramount importance consequently the optimal market structure would consist of a small number of firms the driving force behind such a result is what scherer 1972 has called the lebensraum effect firms performing r d must at least break even they derive their profits from

the financial and operating performance of newly privatized firms evidence from developing countries this paper examines the change in the financial and operating performance of 79 companies from 21 developing countries that experienced full or partial privatization during the period from 1980 to 1992 we use accounting performance measures adjusted for market effects in addition to unadjusted accounting performance measures both unadjusted and market adjusted results show significant increases in profitability operating efficiency capital investment spending output employment level and dividends we also find a decline in leverage following privatization but this change is significant only for unadjusted leverage ratios our results are generally robust when we partition our data into various subsamples

social preferences self interest and the demand for redistribution preferences for redistribution may be influenced by values and beliefs about distributive justice as well as by self interest people may prefer more redistribution to the poor if they believe that poverty is caused by circumstances beyond individual control therefore beliefs about the causes of income may affect demand for redistribution alternatively the effect of these beliefs on redistributive preferences may be spurious if they are correlated with income and self interest is not properly controlled for they may also measure incentive cost concerns using social survey data i find that self interest cannot explain the effect of these beliefs on redistributive preferences 2001 elsevier science b v all rights reserved

helping minor firms reduces welfare the effect on national welfare of uneven technical progress and eli mination of a firm is analyzed under the existence of a cournot oligopolistic sector an increase in the share of an inefficient firm owing to its innovations results in a shift of production from more efficient firms to the inefficient firm causing a less efficie nt allocation of production it may decrease welfare even though the innovation itself is beneficial conversely policies keeping ineffic ient firms from innovations or eliminating them may increase welfare though they make the market structure more oligopolistic copyright 1988 by royal economic society

attitudes toward highly skilled and low skilled immigration evidence from a survey experiment past research has emphasized two critical economic concerns that appear to generate anti immigrant sentiment among native citizens concerns about labor market competition and concerns about the fiscal burden on public services we provide direct tests of both models of attitude formation using an original survey experiment embedded in a nationwide u s survey the labor market competition model predicts that natives will be most opposed to immigrants who have skill levels similar to their own we find instead that both low skilled and highly skilled natives strongly prefer highly skilled immigrants over low skilled immigrants and this preference is not decreasing in natives skill levels the fiscal burden model anticipates that rich natives oppose low skilled immigration more than poor natives and that this gap is larger in states with greater fiscal exposure in terms of immigrant access to public services we find instead that rich and poor natives are equally opposed to low skilled immigration in general in states with high fiscal exposure poor rich natives are more less opposed to low skilled immigration than they are elsewhere this indicates that concerns among poor natives about constraints on welfare benefits as a result of immigration are more relevant than concerns among the rich about increased taxes overall the results suggest that economic self interest at least as currently theorized does not explain voter attitudes toward immigration the results are consistent with alternative arguments emphasizing noneconomic concerns associated with ethnocentrism or sociotropic considerations about how the local economy as a whole may be affected by immigration

privatization not the only answer abstract governments in many developing countries created state owned enterprises soes to produce goods or provide services the private sector seemed unwilling or unable to offer in many cases soes have turned out to be problem children at best inefficient and at worst unable to fulfill their original functions now the recommended solution to the problem of state owned enterprises is privatization but privatization is no more a solution to the problems of soes than soes were a solution to the problems they were created to solve the problem of soes is not ownership but rather a lack of explicit goals and objectives and an absence of organization cultures and systems that support and encourage fulfillment of those goals and objectives in some circumstances privatization may aid in fulfillment of an enterprise s goals and objectives because of the culture and systems it fosters in other cases not

does electoral competition affect politicians trade policy preferences evidence from japan this study examines the effect of electoral competition on politicians trade policy preferences using candidate observations from the house of representatives in japan s 2012 general election the study clarifies the effects of constituency size and the electoral strength of constituencies on candidates political stances the empirical results provide evidence that politicians preferences for trade policy are sensitive to electoral pressure but their reactions differ depending on the characteristics of each constituency the results reveal that for a broad constituency with a large concentration of agricultural workers election candidates are more likely to support protectionism than their counterparts running in a narrow constituency for city district election candidates electoral strength measured by the vote margin significantly affects their trade policy preferences candidates in close elections are more likely to be protectionist than candidates elected by a substantial majority suggesting that electoral pressures deter politicians from supporting trade liberalization

the price of government ownership a study of the domtar takeover abstract this paper presents an analysis of how government ownership of an enterprise may affect its profitability in august 1981 two quebec crown corporations announced that they had gained control of domtar a private canadian corporation upon receipt of this information the stock s market value dropped significantly over six trading days domtar s shareholders suffered cumulative abnormal returns of minus 25 percent which is equivalent to a reduction in market value of approximately 150 million much of this loss can be attributed to government control and the anticipated pursuit of non profit objectives

performance and efficiency in colombia s power distribution system effects of the 1994 reform we assess evolution in performance efficiency and productivity of colombia s power distribution utilities before and after the 1994 regulatory reform that introduced electricity market activities for the power sector in 12 distribution companies from 1985 to 2001 performance is evaluated contrasting changes in mean and median by wilcoxon rank sum and pearson tests on financial and other performance indicators technical efficiency is measured by means of data envelopment analysis dea the nature of the dataset allows the estimation of malmquist productivity index and its evolution in time results show a recovery after the reform in the main performance indicators of profitability partial input productivity and output plant efficiency and productivity increased after the reform mainly in the largest utilities used as benchmarks in the dea efficiency scores measures meanwhile the less efficient power distribution companies did not improved after the reform and were not able to undertake plant restructuring to catch up in plant efficiency with respect to the pareto efficient input allocations econometric results on dea efficiency scores suggest a positive effect of policy reform

support for free trade self interest sociotropic politics and out group anxiety although it is widely acknowledged that an understanding of mass attitudes about trade is crucial to the political economy of foreign commerce only a handful of studies have addressed this topic these studies have focused largely on testing two models both of which emphasize that trade preferences are shaped by how trade affects an individual s income the factor endowments or heckscher ohlin model posits that these preferences are affected primarily by a person s skills the specific factors or ricardo viner model posits that trade preferences depend on the industry in which a person works we find little support for either of these models using two representative national surveys of americans the only potential exception involves the effects of education initial tests indicate that educational attainment and support for open trade are directly related which is often interpreted as support for the heckscher ohlin model however further analysis reveals that education s effects are less representative of skill than of individuals anxieties about involvement with out groups in their own country and beyond furthermore we find strong evidence that trade attitudes are guided less by material self interest than by perceptions of how the u s economy as a whole is affected by trade

from state to private ownership issues from strategic industries abstract this paper investigates the effects of privatization for a panel of 189 firms from strategic industries headquartered in 39 countries and privatized between 1984 and 2002 strategic firms can hardly be compared to manufacturing or competitive industries as they are generally under state monopoly and involve specific issues such as regulation political and institutional constraints we examine the change in ownership and postprivatization means of control by the government and assess whether positive changes in performance obtain in these particular industries that include firms from the financial mining steel telecommunications transportation utilities and oil sectors we document that governments continue to exert influence on former state owned firms after three years by retaining golden shares and or appointing politicians to key positions in the firm our multivariate results reveal a negative effect of state ownership on profitability and operating efficiency which the presence of a sound institutional and political environment moderates

the relative efficiency of public and private firms in a regulated environment the case of u s electric utilities abstract the relative efficiency of privately owned and publicly owned electric utilities is investigated using theoretical and econometric models that allow for the effects of both ownership type and regulation the estimation results indicate that the two types of firms are equally cost inefficient in the united states the average effect of inefficiency is to increase the cost of production by 2 4 percent holding output constant inefficiency increases the average quantities demanded of capital and labor and decreases the average quantity demanded of fuel