Partisan privatizations: assessing the ideological bias

Abstract

Previous empirical literature suggests that privatization choices are driven by ideology. However, available measures of this political bias are weakly grounded as they neglect crucial factors affecting privatizations, such as the liberalization levels and the public finance structure. To fill this gap, we perform an econometric analysis explicitly considering such neglected factors. Our findings conclude that privatization choices in OECD network industries are determined by right-wing ideology.

Keywords:

• privatization
• ideology
• panel estimation

JEL Classification:

• L51
• P16
• C23

Acknowledgements

We warmly thank Niklas Potrafke for his valuable suggestions and for kindly having provided data on political ideology. We also thank Christian Bjørnskov, Fabio Padovano, Pier Luigi Parcu, Norman Schofield and Stefan Voigt for comments and suggestions to previous versions. Usual disclaimers apply. We kindly acknowledge financial support by REFGOV – Institutional Frames for Markets – and by the European University Institute – RSCAS/FSR.

Notes

¹ For example, Martinez-Gallardo and Murillo (2009) find interacting effects between partisanship and financial constraints of governments on the regulatory design in the case of the Latin-American electricity sector's reform.

² Countries are Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Iceland, Ireland, Italy, Japan, Luxembourg, the Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland, the United Kingdom and the United States.

³ Notice that Bortolotti and Pinotti (2008) include a government's debt as a covariate in a duration model, in which privatization is measured through revenues. They find that government debt does not affect in a statistically significant way the timing of privatizations.

⁴ We do not include GDP_GROW in the adjusted model specification (though it turns out to have a statistically significant parameter in the basic model), because it shows a nonignorable statistical correlation with the public finance regressors.