Understanding Privatization Policy: Political Economy and Welfare Effects

1. Understanding Privatization Policy: Political Economy and Welfare Effects Project Co-ordinator: Bernardo Bortolotti (Università di Torino and FEEM)

2. Background: Global Privatization Revenues Source: Privatization Barometer

3. Privatization: What we know • Strong post-privatization performance improvements • Macroeconomic effects: public finance, financial market development • Privatization methods politically motivated • Controversial welfare effects on consumers

4. Privatization: What we do not know • What triggers privatization and make it politically acceptable? • Are performance improvements robust to counterfactual analyses? • Do governments relinquish ownership and control in privatized firms? • What are the overall welfare effects of divestiture in EU? • Is privatization per se or associated policies (liberalization, regulation, corporate governance reforms) that matter more?

5. UPP: Strategic Objectives • Identifying the political and institutional determinants of privatization • Analyzing the evolution of corporate governance in privatized firms and their effects on perfomance • Evaluating the welfare effects of privatization on society • Finding the most suitable policies to make privatization deliver efficiency and growth

6. UPP: The building blocks • Part I. The determinants of privatization • Part II. The methods of privatization • Part III. the welfare effects of privatization • Methodology: political economy-multidisciplinary approach (economics, finance, political science, legal disciplines)

7. WPs implementation

8. The UPP Consortium

9. WP2: The determinants of privatisation policy Objectives: To provide a conceptual framework to relate the observed differences in privatisation outcomes across countries to different political and institutional settings. Deliverables: • Two theoretical papers on the determinants of privatisation policy (month12 and 20) • Guidelines for data collection on political institutions (month 6) • Database on political institutions and political orientation (month14) • Two empirical papers on the determinants of privatisation policy (month18 and 20)

10. WP3: Privatisation in MEDA countries Objectives: • To examine the track record of different forms of public ownership and control in MEDA countries • To evaluate the determinants, methods and outcomes of privatization in this area Deliverables: • Four reports on privatization and regulatory reform in the MEDA region (month 10, 12, 18, and 20) • Database on the privatization transactions in the MEDA region (month 20)

11. WP4: Public vs. private ownership and control Objectives: • To develop a theoretical models analysing the trade-offs between private and public ownership and control of privatized firms and to study their evolution overtime Deliverables: • Guidelines for data collection on ownership and control structures (month 6) • A theoretical paper on the trade offs between public and private ownership and control (month14) • Database on ownership and control structures in OECD economies (month 14) • Two empirical papers on the evolution of ownership an control in privatised firms (month 18 and 20)

12. WP5: Performance from transition to EU integration Objectives: • To explore how various ownership and management structures affect corporate performance in a main transition country such as the Czech Republic. Deliverables • A panel data set on corporate ownership and performance in the Czech Republic (month10) • A theoretical paper on the effect of ownership changes in performance (month 14) • Two empirical papers on company performance in a transition economy (month 18 and 20)

13. WP6: Welfare effects I Objectives: • To study the welfare impact on consumer and employees wealth of privatisation, liberalisation and regulation of public utilities under different policy regimes with special reference to SGI Deliverables • Databases on welfare measures for consumers and employees (month 8) • Three empirical papers on the welfare effects of privatisation on consumers (month 8, 14 and 20)

14. WP7: Welfare effects II Objectives • To consider the fiscal impact of privatisation on the current and the long-term budget and to relate it with the incentives for government policy by means of theoretical and empirical analysis Deliverables • A panel database on fiscal measures and institutions for European countries (month 8) • Three empirical papers on the fiscal effects of privatization (month 12, 18, 20)

15. WP8 Welfare effects III Objectives: • To analyse the risk and return characteristics of these indexes using multifactor analysis • To identify – if any - an undiversifiable risk factor associated with the residual influence of the State in the economic system. Deliverables: • A database with daily series of privatization indexes (month 12) • An empirical paper on the stock price performance of privatization-related indexes (month 20)

16. WP9:Expert interviews and targeted surveys Objective: • To develop a joint / harmonised interviewing and survey methodology to be implemented in at least the 5 countries - Czech Republic, Germany, Italy, Netherlands, Spain – represented in the consortium on privatisation choices and outcomes as perceived by the most relevant stakeholders Deliverables • Standardised questionnaire to be used for enterprises in all 5 countries (month 6) • Frame for in-depth interviews with key informants and other relevant stakeholders in all 5 countries (month 6) • Report on judgements and qualitative other information on politics of privatisation user in the individual countries as well in a synthesised cross country comparison (month 21)

17. WP10: Making privatisation deliver Objectives: • To identify policy recommendations for successful implementation of privatisation policies, with special reference to the enlarged EU and MEDA countries Deliverables • Policy report summarising the main recommendations (month 24) • Regulatory guidelines on Corporate Governance, Institutional Reform and European Financial and Economic Integration (month 24)