ABSTRACT
The term ‘privatisation’ can refer to three broad types of policy: first, asset transfer from the public to the private sector, generally through sale; second, deregulation or liberalisation of statutory monopolies (with or without the sale of assets), with particular emphasis on the removal of entry restrictions; and finally, franchising or contracting out the provision of marketable goods and services to private sector firms.2 We could add corporatisation as a fourth method of privatisation; this is transferring the supply of goods and services from the governmental sector to a separate company according to corporate law, while the government remains the owner.3 And we can label activities to promote efficiency and competition within the government as a fifth mode of privatisation. The motives for privatisation fall in general into one or more of the following categories: financial motives of the seller (gaining revenues or balancing losses), increase of productive efficiency (reducing average costs), and the pursuit of allocative efficiency (increasing consumer surplus). It is well known that the first goal can be achieved only in combination with an increase in the second, because otherwise the selling price would equal forgone future dividends.
