The purpose of this paper is to reassess and extend the theoretical treatment of the welfare and political economy dimensions of the choice between public ownership and privatisation. The welfare analysis of privatisation presented in this paper can be used to examine a variety of situations. It could be used to analyse the implications of policies designed to reform state-owned enterprises without changing ownership or to investigate the welfare effects that the threat of privatisation rather than actual privatisation might entail. We continue by outlining the characteristics of a more general model of state-owned enterprise. We then examine the welfare and political economy implications of public ownership and privatisation under different assumptions for market structures. The final section draws conclusions.
Manchester, UK, CRC Working Paper, No. 1, 22 pp.