The debate over privatisation is essentially the debate over the relative efficiency of the state versus markets and private property in the allocation of resources. It is argued that privatisation can be undertaken as part of a state's development strategy and can be an important part of a development process. In these circumstances, privatisation needs to be examined against state theory. The sources of state capacity and capabilities as well as factors which constrain state policy then become important in determining the success of privatisation. Within this context, the paper considers: state theories; asymmetric information; political constraints (state capacity, institutional failure, and patron-client networks); and policy implications (perverse incentives and moral hazards).
Manchester, UK, CRC Working Paper, No. 29, 26 pp.