Privatization and Economic Growth; A Cross Country Study

In this paper, we intend to investigate the impact of privatization on economic growth in developing and transition economies. Previous studies that have attempted to measure this relationship have conflicting results, some indicating a positive impact of privatization on growth, while others indicate a negative relationship. Our study uses recent World Bank data on privatization for 117 countries over the time period 1988-2003. We explore the impact of privatization on growth by estimating an empirical growth model using two-stage least squares and ordinary least squares estimations in the context of three time frames. Our results indicate that privatization is neutral with regard to economic growth, while a competitive regulatory environment has a positive impact on growth.