Privatization Dragged Out of a Hat as Part of an Economic Toolbox: Evidence From A Cross-Country Study

Abstrakt

This thesis investigates the role of privatization on improving economic growth. It uses an econometric framework, analyzing a cross-country sample consisting of 142 countries in the period of 1960-2014. It reviews the history of how privatization became integrated into the economic toolbox of stimulating the economy, especially in developing countries. Thereafter, I review prior literature, establishing that the approach followed by this study is original and can contribute positively to the research on privatizations. This thesis finds clear evidence that privatization overall has a positive effect on GDP per capita Growth, independent of different specifications of the privatization dummy variable. More specifically, the empirical results suggest a positive relationship between the size of privatization relative to GDP and the effect on GDP growth, as the effect of the largest privatizations by volume is approximately one percent greater than the effect of the earliest privatizations. Sampling developing countries also shows that privatization has a positive effect; however, this effect is not as great as for the whole dataset. Dividing the sample into regional subsamples indicates that privatizations in Africa are negative related to economic growth albeit insignificant results, while privatizations are associated with an slight increase in Latin America and the Caribbean and Asia, and an increase of 3-4 percent in GDP per capita growth in richer countries in Oceania, Europe, and North America. In addition, I demonstrate that there is likely to be a bottom threshold, above which privatizations are positively linked to economic growth, and that this threshold lay in the area of middle-income countries and countries, which have high levels of debt but do not suffer from conflicts and have a higher level of development than Least-Developed Countries. Furthermore, the results indicate that the largest privatizations in the competitive and financial sector are associated with economic growth, while the first privatizations point to greater successful privatizations in the energy and manufacturing sector. There are indications that privatizations in infrastructure have a greater effect the larger they are. Lastly, this paper finds little evidence for a negative relationship between privatization and IMF loans.