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Understanding Privatisation Policy: Political Economy and Welfare Effects

Final Report Summary - UPP (Understanding Privatisation Policy: Political Economy and Welfare Effects)

Privatisation is one of the main events of the economic history of the last decades, a landmark economic policy of the last two decades: its record to date is impressive, both in developed and developing economies. Yet, some countries have pursued a consistent and sustained privatisation policy as a part of wider reform packages, while in others ambitious programmes have been blocked on their way by adverse interest groups, so that privatisation has been sporadic and small-scaled. Furthermore, some governments, have typically transferred the majority of capital of State-owned enterprises (SOE) to private investors, while in continental Europe the prevailing corporate governance model in privatised firms appears to be the separation of ownership and control, typified by government wielding power through pyramiding and statutory constraints especially in services of general interest (henceforth SGI). Finally, a cosmic 'disconnect' is arising between the academic consensus and how privatisation is perceived by the population, especially in transition economies and in the poorer regions of the world.

In these circumstances, it is imperative to analyse the true record of privatisation and understand the causes behind failures in order to improve the process in the future. Despite the relevance of the process and the extensive research recently carried out, several aspects of privatisation such as its determinants, methods, and economic and social implications warrant a systematic analysis and research efforts. Against this background, the main objectives of the project UPP were:
1) to study the political and institutional incentives and constraints affecting privatisation;
2) to analyse the interactions between private and public ownership and control of firms;
3) to evaluate the welfare effect of privatisation policies on consumers, taxpayers and shareholders;
4) to identify the most appropriate policies to make privatisation deliver the most desirable outcomes.
The project adopts a multidisciplinary approach, mobilising researchers from economics, finance, political science, and judicial disciplines working in five universities and three research institutions of five European countries, including a new accession country.

This project provides an overview of the causes and consequences of the SOE sector reform process. The final question which arises is the following: is the coexistence of private ownership with public control a transient anomaly or a functional pattern of governance? Providing a unanimous answer is difficult but this question is certainly an important avenue for the future research, both on theoretical and empirical sides. For the time being, we conjecture that the pure privatisation (the complete transfer of ownership and control to the private sector) appears difficult to achieve and sustain, as several conditions should be met.

Dissemination of research outputs and policy options is one of the key objective of the implementation plan of the project and its aim is to reach the highest number of possible end-users in Europe and around the world with useful guidelines for sound policymaking will allow to maximise the potential impact of the research outputs. Dissemination of the project's results is therefore achieved using a new instrument and conventional outlets such as the working papers, workshops and conferences. Particularly relevant to this aim is the ad hoc web-based facility entitled 'Privatisation barometer' (PB), the major dissemination instrument of the project, that ensures the wider exposure of the project's result to the international community. PB is the first comprehensive internet portal focusing on privatisation in the European Union, including the first central and eastern European (CEE) accession countries. As a non-profit initiative, all the content - and its regular updates - is available free of charge to any user. Founded in 2004 by Fondazione Eni Enrico Mattei and Fondazione IRI (two independent research institutions), PB has established a unique and independent source for policy analysis of privatisation and related issues that is strongly based on objective research. By reporting comprehensive data and information on the historical process and most recent and future trends, PB provides a focal point for an international audience of researchers, analysts, international agencies, governments and policy-makers. PB has been recently selected by the OECD as its primary source of privatisation data, and by World Bank for the supply of revenues data for the WB privatisation database. Substantial network effects have been already obtained in the dissemination activity of the project's first year activities by leveraging on the high visibility of PB. Since the launch in July 2004, PB has been widely accessed (145 980 visitors, 560 000 page views, on average 340 single IP users per day). The breakdown of the first 1 000 registered users shows PB is attracting considerable attention from researchers and academic users, followed by governments, agencies and international organisations. As the access statistics show, most of present PB content is widely accessed and downloaded to be utilised as a fundamental research tool. More particularly, the breakdown of registered users shows that PB is attracting considerable and increasing attention from the media as a primary source of data, information and analysis on privatisation. The section of PB dedicated to UPP is targeting a wide audience, providing information on UPP progress in a widely accessible and non-technical language.

A dedicated UPP intranet section is established and maintained. It includes:
(i) scientific contents;
(ii) publishing all project findings and intermediate scientific outputs;
(iii) and to establish links with the partner institutions.
Moreover, an electronic newsletter is distributed to a wide list of academics, policy-makers and interested public at large, starting from the start of the project. The e-newsletter updates readers on the progresses of the action and contains direct links to the output of the action, in order to disseminate the results of the project outside the project.

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