Privatization and economic growth: an empirical investigation from a sample of developing market economies

Abstract

This paper explores the economic determinants of privatization programmes and the macroeconomic impact of this institutional reform on the growth rate of the GDP. A sample of thirty five developing market economies is considered over the 1988-92 period. Probit and Tobit models are used to identify the determinants of successful privatization programmes. Then regressions are run where probabilities (Probit) and expected values (Tobit) are successively included as additional regressors beside the potential influence of other economic policy variables. A significant positive effect is highlighted, giving evidence of the importance of divestiture. The economic effect is found to be stronger when this institutional reform took place in industry or infrastructure.