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A Theoretical Reexamination of Privatization: Assessing its Welfare Impacts
Author(s) -
Ang Alvin,
Yamada Masatoshi
Publication year - 2007
Publication title -
review of development economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.531
H-Index - 50
eISSN - 1467-9361
pISSN - 1363-6669
DOI - 10.1111/j.1467-9361.2007.00420.x
Subject(s) - economics , comparative statics , economic interventionism , intervention (counseling) , welfare , public economics , government (linguistics) , production (economics) , distributive property , social welfare , microeconomics , public good , market economy , politics , political science , psychology , linguistics , philosophy , mathematics , psychiatry , pure mathematics , law
Privatization has been one of the significant public policies adopted in the last two decades. Previous studies have focussed on efficacy gains at the firm and industry levels. This paper intends to reconsider the distributive impacts of privatization on the economy as a whole from a theoretical perspective. Specifically, it supposes an economy with two goods, two producers and two consumers, in which it is assumed that one of the consumers is not able to obtain one good that is regarded as a necessity. Since one basis of government intervention is to provide necessity to people who would not otherwise be able to obtain it, government intervention into production is assumed to satisfy this purpose. Using comparative statics, the paper analyzes how the welfare of two consumers is affected by this intervention, and shows that intervention can increase the welfare of some consumers and social welfare in general.