The Benefits of Privatization : Evidence from Mexico

Abstract

Critics of privatization often argue that its benefits come at a high cost to society. The authors test the validity of this criticism for Mexico's privatization program, one of the world's largest case-by-case programs. Assessing the performance of newly privatized firms in such areas as profitability and efficiency, they find that these firms quickly close the gap with their peers in the private sector. Their findings suggest that the firms' profit gains come from productivity gains (52 percent), layoffs (33 percent), and higher prices (15 percent).