Reality Check: The Distributional Impact of Privatization in Developing Countries

John Nellis
October 17, 2005

"Most studies of privatization look at what happens to companies; this volume looks at what happens to people—workers, consumers, and the disadvantaged.
This is progress."
—Joseph Stiglitz, Professor, Columbia University

"Politically, privatization has always been a difficult sell: Critics claim it rewards the wealthy and the foreign at the expense of the poor and local. The studies in this book show this is not the case: privatization’s reputation is largely undeserved."
—Pedro-Pablo Kuczynski, Minister of Economy and Finance of Peru

The privatization of state-owned enterprises has been among the most controversial of market reforms. This new edited volume brings together a comprehensive set of country studies on the effects of privatization on people—and answers the overarching question: who are the winners and losers of the wave of privatizations that swept across the developing world in the 1980s and 1990s?

The studies are sophisticated and careful, and address the big questions: Are the poorest households paying more for water, power, and other basic services? Did those who lost jobs suffer permanent declines in income? Were state assets sold at prices that were too low, and who benefited from the resulting windfalls? Was the process, in laypersons’ terms, "fair"?

Some readers will be surprised at the general conclusion: that privatization has, in many cases, been a reasonably good thing, and not only for the rich. Others will be surprised at its limited effects. As privatization remains on the policy agenda despite public resistance and continuing controversy, almost all readers will want to understand the potential of privatization to stimulate competition while at the same time being fundamentally more just and fair.

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