Political incentives appear to affect the likelihood of privatization. Provinces in Argentina whose governors belonged to a fiscally conservative party were more likely to privatize, and fiscal and economic crises increased the likelihood of privatization.
Clarke and Cull study the political economy of bank privatization in Argentina. The results of their study strongly support the hypothesis that political incentives affect the likelihood of privatization.
They find that:
They tested the hypotheses for a specific industry in a specific country, making it possible to control for enterprise performance and institutional characteristics. It seems reasonable to expect that similar results might hold in other industries and countries.
This paper—a product of the Development Research Group—is part of a larger effort in the group to investigate the determinants of structural change in development countries' banking sectors. Copies of the paper are available free from the World Bank, 1818 H Street NW, Washington, DC 20433. Please contact Paulina Sintim-Aboagye, room MC3-422, telephone 202-473-8526, fax 202-522-1155, Internet address psintimaboagye @worldbank.org. The authors may be contacted at gclarke@worldbank.org or rcull@worldbank.org. (27 pages)
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