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AN ECONOMIC GROWTH MEASUREMENT MODEL BY THE PRIVATIZATION MARKET POLICIES

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Author(s): stamatis kontsas

Journal: Journal of Management Research
ISSN 1941-899X

Volume: 2;
Issue: 2;
Date: 2010;
Original page

ABSTRACT
This paper attempts to consider the reaction of output to privatization. The public sector produces goods of lower quality, and at lower prices, than the private sector. By driving a quality and price wedge between private and public output, an excessive public sector distorts production and reduces its overall quality. The elimination of this distortion increases both the level of output and its rate of growth over time.                 The main message of the paper is that privatization, by reducing or removing distortions caused by excessive subsidies and taxes and by thus increasing the overall quality of output, can play an important role in encouraging the reallocation of resources and the reorganization of production that are necessary to foster a favourable development of output and employment after the initial post-reform slump. In particular, privatization not only helps raise the level of output per head, but also its rate of growth over time. In this respect, the quality and price distortion resulting from an excessive public sector, is no different from the distortions that result from price controls or trade restrictions or from high inflation. The same general framework fits all three phenomena -liberalization, stabilization and privatization. JEL Classification: O40, P11 Keywords: privatization, efficiency, economic growth,  stabilization, reallocation  
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