Privatization and Changes in Corruption Patterns: The Roots of Public Discontent

David Martimort, Stephane Straub

Research output: Working paperDiscussion paper

Abstract

This paper offers a theory of how the degree of corruption that prevails in a society responds to changes in the ownership structure of major public service providers. We show that there are cases in which privatization, even though it fosters investments in infrastructure, also opens the door to more corruption. The public dissatisfaction towards privatization is then crucially affected by the changes in the degree and pattern of corruption. Our model thus helps understand the seemingly paradoxical situation prevailing in Latin America, where most studies find that privatizations have been efficiency-enhancing and have fostered investments and, at the same time, popular dissatisfaction with the process is extremely high, especially among the middle class. We show that this line of explanation is supported by evidence from surveys in the region.
Original languageEnglish
PublisherEdinburgh School of Economics Discussion Paper Series
Number of pages39
Publication statusPublished - 17 Feb 2006

Publication series

NameESE Discussion Papers
No.147

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