Privatization Discontent and it's Determinants: Evidence from Latin America

Abstract

Privatization Discontent and Its Determinants:Evidence from Latin AmericaPrivatization policy faces increasing popular opposition in Latin America. After a discussion of recent empirical literature on this topic, we ask two simple questions: Who are the people most dissatisfied with privatization? and: Why are they dissatisfied? To answer, we use social attitudes combined with objective controls at country level. The former include the results of three waves of Latinobarometro surveys (51,635 observations, 1998, 2000 and 2002, in 17 countries). The latter include privatization data and macroeconomic variables. The data on country-specific experiences of privatization come from two different data-set. One data set exploits information about 340 divestitures occurred in Latin American countries, over the period 1990-2001. The second includes 923 infrastructure projects with private participation (including divestitures, concessions and other contracts) over the period [1984][1985][1986][1987][1988][1989][1990][1991][1992][1993][1994][1995][1996][1997][1998][1999][2000][2001][2002]. We test several empirical models and we find that disagreement with privatization is most likely when the respondent is poor, privatization was large and quick, involved a high proportion of public services as water and electricity, in countries where there is high inequality of incomes. A robust non-linear relationship between socio-economic status and dissatisfaction with privatization suggests that particularly middle-to-low income households, with a median level of nine years of education, perceive to have suffered from privatization. While misperceptions cannot be ruled out, this result is broadly consistent with recent empirical research in Latin America that points to distributional concerns in the implementation of privatization policy because of tariff rebalancing not adequately addressed by policy makers and regulators.JEL Classification: H32, G14, L33