Title page for ETD etd-080699-132138

Type of Document Dissertation
Author Ho, Wai Hong
URN etd-080699-132138
Title Economc Analysis of Privatization
Degree PhD
Department Economics (Arts and Sciences)
Advisory Committee
Advisor Name Title
Haller, Hans H. Committee Chair
Kats, Amoz Committee Member
Lutz, Nancy A. Committee Member
Snyder, Susan K. Committee Member
Stegeman, Mark Committee Member
  • Privatization
  • Principal-agent
  • Credit Rationing
  • Commitment
  • Economic Growth
Date of Defense 1999-05-25
Availability unrestricted
This collection of papers originates from my

interest in the reform efforts in transitional

economies. Each of the chapters is self-contained.

Chapter one presents a brief literature survey

of those schools of thought that have contributed

to our knowledge about privatization.

In chapter two, a public firm model and a private

firm model are compared based on agency approach,

assuming that the owner of a firm has cost

information but also bears the cost of production.

I find that the question which type of ownership,

private or public, is superior does not have a clear

cut answer. Private ownership may induce higher

work effort but suffers from a discrepancy of

private and social goals. While production

distortion is less serious, an obvious disincentive

to work exists in the public firm.

Chapter three examines how privatization can be

considered as a threat to stimulate a public firm

manager's work incentive when his effort level cannot

be observed by the government. I find that, in the case

when commitment to privatize is impossible, the government

will set a strictly positive wage rate and a strictly

positive investment subsidy to signal the government's

determination to implement the privatization policy.

In chapter four, I examine the role that public investment

plays in a financial market with a credit rationing problem.

Two kinds of borrowers co-exist in the economy, namely the

public and the private. Public borrowers enjoy a "first

mover" advantage to borrow money from banks.

In this situation, the credit rationing is found escalating.

But since the success of a public project (owned by a public

borrower) can exert positive externality on the productivity

of private projects, the adverse effect induced by credit rationing

can be alleviated. We show that if the quality of the public

projects is good enough, the economic growth rate can be higher

than the case without public projects in the economy.

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