Auriol, EmmanuellePicard, Pierre M.2012-06-192012-06-192006-06https://hdl.handle.net/10986/8429The paper analyzes governments' tradeoff between fiscal benefits and consumer surplus in privatization reforms of noncompetitive industries in developing countries. Under privatization, the control rights are transferred to private interests so that public subsidies decline. This benefit for tax-payers comes at the cost of price increases for consumers. In developing countries, tight budget constraints imply that privatization may be optimal for low profitability segments. For highly profitable public utilities, the combination of allocative inefficiency and critical budgetary conditions may favor public ownership. Finally, once a market segment gives room for more than one firm, governments prefer to regulate the industry. In the absence of a credible regulatory agency, regulation is achieved through public ownership.CC BY 3.0 IGOADVERSE SELECTIONASSET SALESASYMMETRIC INFORMATIONAUCTIONAUCTIONSBENCHMARKBENEFITS OF PRIVATIZATIONBIDDERSBUDGET CONSTRAINTBUDGET CONSTRAINTSCAPITAL FLOWSCOMPETITIVE INDUSTRIESCONCESSION CONTRACTSCONSUMER SURPLUSCONSUMERSCOST FUNCTIONSCOURNOT COMPETITIONCREDIT RATINGSCROSS-BORDERDEBTDEMAND FUNCTIONDEMAND FUNCTIONSDIVESTITUREDOMESTIC FINANCINGDUOPOLYECONOMIC ASSISTANCEECONOMIC PERFORMANCEECONOMIC RISKECONOMIES OF SCALEEFFECTIVE REGULATIONEFFICIENCY GAINSEFFICIENCY OF FIRMSEFFICIENT MANAGEMENTELECTRICITYEXCLUSIVITY PERIODEXCLUSIVITY PERIODSEXECUTIVE DIRECTORSEXPECTED RETURNSFINANCIAL DISCIPLINEFINANCIAL OBLIGATIONFIXED COSTSFOREIGN DIRECT INVESTMENTGDPGOVERNMENT BUDGETGOVERNMENT SUBSIDIESHAZARD RATEINCENTIVE CONTRACTSINCOME LEVELSINCREASING RETURNSINCREASING RETURNS TO SCALEINDUSTRIAL POLICYINEFFICIENCYINFORMATION ASYMMETRYINFORMATION COSTSINSTITUTIONAL INVESTORINVESTMENT STRATEGIESLACK OF TRANSPARENCYLEGAL OBLIGATIONSLOCAL SERVICESMARGINAL COSTMARGINAL COST OF PRODUCTIONMARGINAL COSTSMARKET ENTRYMARKET LIBERALIZATIONMARKET POWERMARKET SEGMENTMONOPOLIESMONOPOLYMONOPOLY PRICESMORAL HAZARDNASH EQUILIBRIUMNATURAL MONOPOLIESNATURAL MONOPOLYOPPORTUNITY COSTOPPORTUNITY COSTSOWNERSHIP STRUCTUREPERFECT INFORMATIONPERFORMANCE OF PRIVATEPERFORMANCE OF PUBLICPOLITICAL RISKPRICE INCREASESPRICE LIBERALIZATIONPRICE REGULATIONPRIVATE CONTROLPRIVATE ENTREPRENEURSPRIVATE FIRMPRIVATE FIRMSPRIVATE INTERESTSPRIVATE INVESTORSPRIVATE MONOPOLIESPRIVATE MONOPOLYPRIVATE OPERATORSPRIVATE OWNERSHIPPRIVATE SECTORPRIVATIZATIONPRIVATIZATION DECISIONPRIVATIZATION PLANPRIVATIZATION PROCEEDSPRIVATIZATION PROCESSESPRIVATIZATION PROGRAMSPRIVATIZATION TRENDSPRIVATIZATIONSPRODUCT MARKETPUBLICPUBLIC ASSETSPUBLIC DEFICITPUBLIC ENTERPRISESPUBLIC EXPENDITUREPUBLIC FINANCEPUBLIC FINANCESPUBLIC FUNDSPUBLIC GOODSPUBLIC INVESTMENTPUBLIC OWNERSHIPPUBLIC SUBSIDIESPUBLIC UTILITIESREGULATORY AGENCYREGULATORY BODIESRETURNS ON INVESTMENTRISK NEUTRALSALESALE PRICESHAREHOLDERSSOCIALIST ECONOMIESSOFT BUDGET CONSTRAINTSSPREADSTATE OWNED ENTERPRISESSTATE OWNERSHIPSURPLUSESTAXTAX REVENUETAXATIONTOTAL REVENUETRANSPARENCYWorld Bank10.1596/1813-9450-3950