Winners and Losers: Assessing the Distributional Impact of Privatization
Author(s)
Birdsall, Nancy; Nellis, John
Abstract
Most technical assessments classify privatization as a success. But privatization, especially in transitional and developing economies, is seen as fundamentally unfair both in conception and execution, and it is widely and increasingly unpopular. We set out a simple framework for assessing the equity (or fairness) and efficiency gains from privatization, and for understanding any tradeoff between the two. We then review what is known about the distributional effects of privatization, focusing on changes in asset ownership, employment and returns to labor, access to and prices of utility/infrastructure services, and the selling government’s fiscal position. We conclude that many privatization programs have worsened the distribution of assets and income, at least in the short-run. This is more evident in transitional economies than in Latin America. It is less clear for utilities such as electricity and telecommunications–where privatization has resulted in greatly increased access for the poor–than for banks, oil companies and other natural resource producers, where the benefits have been concentrated.
