Does privatisation reduce public deficits?
This paper provides the first ever analysis of the two-way relationship between the privatisation of government services and fiscal balance. It uses data from 22 European countries between 1995 and 2013 to examine the factors that promote privatisation policies and the effects that privatisation then has on public finances. This is important because privatization has been promoted by both the European Union and the International Monetary Fund as a way of responding to financial crises, and in an era of austerity it is important to have robust empirical evidence about the extent to which privatisation has achieved this. Our analysis demonstrates that governments often adopt privatisation policies in the hope of improving their fiscal balances, but that political ideology is important since left-wing administrations are more likely to see it as a means of also restructuring government services.
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Affiliations: 1: University of Salamanca, Multidisciplinary Institute for Enterprises (IME) Spain 2: University of the Basque Country, Spain
Appeared or available online: March 21, 2019