Politics and Privatization: Exogenous pressures, domestic incentives and state divestiture in Latin America

Abstract

Despite a pervasive trend towards state retrenchment in Latin America since the s, there remains significant variation in the levels of privatization across the region. However, very few cross-national studies of the determinants of privatization have been conducted and we still do not truly know why states privatize. This paper examines the determinants of privatization for  Latin American states over the period  to . I contend that privatization is best conceptualized as a two-stage process involving an initial decision to privatize, followed by a subsequent decision concerning the extent and intensity of privatization. In addition, privatization cannot be simply explained by either international or domestic level-variables. Rather, endogenous and exogenous variables will have different impacts at different stages of this process. The results of the statistical tests yield two important insights. Firstly, the initial decision to privatize is primarily shaped by international factors, in particular, international diffusion, while variation in the level of state divestiture across the region can primarily be explained by domestic economic and political conditions.

The Determinants of Privatization: a Comparative Analysis of Developing Countries

“…We contend that privatization is best modeled as a two-stage process, involving an initial decision over whether to adopt privatization or not, and if adopted as a reform measure, a subsequent decision over the scale and extent of what to divest (see also Meseguer 2004;Doyle 2010). What is more, at each stage of this process endogenous and exogenous variables will generate different incentives.…”

“…For developing countries, given the international context at the beginning of the 1990s, this incentive may have been exacerbated, due to the debt crisis in Latin America, and the process of market liberalization in Eastern Europe after the collapse of the Soviet Union. Emulative processes played a large role in the initiation of privatizations across Latin America (see Meseguer 2004;Doyle 2010), while peer dynamics had a significant effect on the adoption of pension privatization across Eastern Europe and Central Asia (see Brooks 2005).…”

“…7 There is a small but growing body of quantitative work that focuses on the causal factors driving privatization across countries and across time. This literature offers a number of explanations for state divestiture, the most prominent of which include partisanship (Boix 1997;Doyle 2010), the pressures of liberalization (Schneider, Fink and Tenbu¨cken 2005), diffusion (Meseguer 2004), domestic economic conditions (Brune and Garrett 2000;Zohlnho¨fer, Obinger and Wolf 2008) and the design of legal institutions (Bortolotti, Fantini and Siniscalco 2003).…”

“…In particular, the potential efficiency gain from privatization has received considerable attention from economists (see for example, Dewenter and Malatesta 2001). There are now a growing number of empirical studies that explore the determinants of privatization across countries and across time (see Boix 1997;Brune and Garrett 2000;Biglaiser and Danis 2002;Bortolotti, Fantini and Siniscalco 2003;Brune, Garrett and Kogut 2004;Meseguer 2004;Henisz, Zellner and Guille´n 2005;Schneider, Fink and Tenbu¨cken 2005;Murillo and Martı´nez-Gallardo 2007;Zohlnho¨fer, Obinger and Wolf 2008;Doyle 2010;Bjørnskov and Potrafke 2011). The majority of these studies, however, focus exclusively on the advanced industrialized nations and many of them have been hampered by methodological limitations coupled with the lack of reliable, comparable and temporal data on privatization.…”

Maximizing the Reliability of Cross-National Measures of Presidential Power

“…Thus, they are not included in the set of 49 studies of presidential power that we identified. 8 For example, Doyle 2010. nineteen separate and original measures of presidential power, 9 plus a further sixteen studies that used one of these measures but both/either reported scores for a different set of countries and/or gave countries different scores from the original study.…”