Understanding Privatisation Policy:
Political Economy and Welfare Effects
Workpackage 2
The Determinants of Privatisation Policy
Humberto Llavador and Paolo Pinotti
Universitat Pompeu Fabra
Barcelona, UPP Kickoff Meeting
February 24, 2006
WP2: The determinants of privatization policy
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Combined theoretical and empirical approach.
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Modeling political competition and the institutional framework.
Data collection on political institutions and political orientation.
Political fragmentation, ideology and privatization.
Expected outcomes
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Guidelines for data collection on political institutions (July 2006)
Database on political institutions and political orientation (April
2007)
Two to four theoretical papers (Feb. & Nov. 2007)
Two empirical papers (July & Nov. 2007)
Understanding and modeling political
competition and voting behavior.
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Searching for a political competition model for
parliamentary (proportional representation) and
multiparty political systems.
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The role of parliaments, coalitional governments and
the opposition parties in policymaking and its influence
in electoral outcomes.
A distinctive feature is that parties and voters care
about margins of victory.
Understanding and modeling political
competition and voting behavior.
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Incumbency advantage and legislature irresponsibility
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Western democracies present high re-election rates.
How much do incumbents choose their policy actions to gain
electoral support?
The political science literature has been careful to recognize that
answering this question and measuring the true incumbency
advantage is not as stratigtforward as one may think.
Understanding incumbency advantage and its causal relationship
with legislature irresponsibility has direct implication on the
understanding of the policy choices made by incumbents.
Privatization, political fragmentation, and ideology
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political fragmentation  privatization
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ideology  privatization
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“common pool” problem
“war of attrition” model
distributional and welfare consequences
privatization  ideology
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strategic privatization (Biais & Perotti AER 2002)
contribution
1. provide comprehensive database
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approx. 40 countries (including all OECD)
over privatization period (1977-200…)
2. use it to test empirical implications of political
economy models relevant to privatization
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political fragmentation, ideology  timing of
privatization
privatization methods  ideology
database:
issues
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qualitative indexes
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binary/discrete vs. continuous measures
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trade off between descriptive power and discretion
accuracy of data
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government composition
parliament composition
electoral results
(ok)
(low)
(low)
database:
political fragmentation
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parties as basic cohesive political players
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existing measures:
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government and parliament
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binary: cohesive vs.
fragmented
simple number of parties
concentration indexes
elections
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binary majoritarian vs.
proportional
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our proposal
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government and parliament
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concentration indexes
elections
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continuous disproportionality index
database:
political fragmentation
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effective number of parties (gov. and parl.)
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electoral dis-proportionality
database:
political fragmentation
database:
ideology
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existing measures
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our proposal
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defined only for executive
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binary/discrete indexes
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define measure for single
parties
continuous measure
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arbitrary
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based on expert surveys
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Huber & Inglehart (1995)
Laver and Hunt (1992)
Castles and Mair (1984)
aggregate by weighted
average (weights = %seats)
database:
sample & sources
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sample:
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sources:
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21 OECD countries over 1977-2002
Liphart (1994)
Banks, Day & Muller (2002)
Electoral Studies (review, various issues)
Elections Around the World (web site)
cross-checking among the different sources
database:
accuracy
empirical test:
timing of privatization
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successful reform is public good
political fragmentation affects distribution of
political, social and economic costs of reform
war of attrition model:
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less fragmentation: faster reform
more fragmentation: longer time to reform
parallel literature on public debt / deficits
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a remark: “war of attrition” has predictions for timing
empirical test:
timing of privatization
empirical test:
timing of privatization
work in progress…
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expand the sample
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conclude the analysis about the determinants of
the timing
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define a proper empirical test for the Biais &
Perotti (2002)