Privatization and its Determinants: A Significant Study of Developing Countries

Abstract

Privatization can mean various things, like shifting from the public sector to the private sector. Since privatizing assets is essentially a sale to creators, the well-being will be redistributed to taxpayers, stockholders and workers. This information as a positive supplement for the conventional analysis of applied welfare economy. In both the developed and the developing economies, privatization was an important component of structural reform programs. This form of plan, by cutting excessive incentives, aims to improve microeconomic performance and stimulate economic growth and reducing government debt requirements. Empirical evidence corroborates the hypothesis, in that privatization boosts both competitive and monopoly income and effectiveness, but in this latter field the effect is lower. In addition to the portion that is clarified by rises in production which are their competitive power, complete privatisation has a stronger effect than partial privatisation and monopoly industries. For the architects of regulatory policies, this presents a major challenge, particularly in monopoly sectors. There is an ambiguous change in jobs at company level, although companies traded publicly show a real increase in employment levels after privatization. Some conclusive evidence can be taken from macroeconomic viewpoints, but patterns are positive with regard to deficit of the public sector, attractiveness of foreign direct investments and capitalization on the stock market. The challenges to successful privatization include corporate governance problems following privatization and legal changes in shareholders security.