The picture illustrated in the previous chapter confirms a now accepted fact: the privatization process, which began in the United Kingdom at the end of the 1970s, spread progressively to the main areas of the world, accelerated during the 1990s, and abruptly slowed down at the end of the twentieth century. The roll-back of the state and its bureaucrats from economic activity, nevertheless, took place at very different speeds and in very different ways. The intensity of the phenomenon, measured in terms of revenue, varies greatly in a cross country comparison.
Why do governments privatize? Why do some countries accomplish large-scale privatization programmes, and others never privatize at all? In this chapter, we tackle these issues, focusing on the economic, political, and institutional determinants of privatization, bringing to the data a series of theoretical hypotheses set forth by the literature.
The availability of certain economic, political, and institutional data in some countries forces us to limit the empirical analysis to the same sample of countries examined by La Porta, López-de-Silanes, Shleifer, and Vishny (1997 ; 1998). 1 This list identifies countries with some non-financial firms with no government ownership traded on their stock exchanges in 1993. The selection of countries is suitable for our purposes: first, we are particularly interested in studying the role of financial markets in shaping privatization processes; second, legal origin indicators are available in the literature only for these countries. The countries chosen cover all geographical areas, with the sole exception of transition economies. Indeed, it will be inappropriate to include them in our analyses due to the fundamental differences in terms of income level, income distribution, political and economic processes (Boycko, Shleifer, and Vishny 1994). Furthermore, the availability of institutional data is very limited and political data more difficult to interpret. The sample covers the 1977-99 period, and accounts for a large proportion of privatization deals (60 per cent of world privatization sales: 2,688 sales) and 93 per cent of world revenues ($1,216 billion).
The analyses presented in this chapter are focused on revenue as an indicator of the extent of the privatization process carried out in a country.