Does Privatization in Iran Increase the Size of the Private Sector?

One of the important goals of privatization is reducing the size of the public sector and increasing the size of the private sector. In this paper we ask if shares of privatized SOEs are sold to private owned institutions and individuals or returned to other parts of public sector. We use Iran Privatization Organizations (IPO) data from 2003 to 2007 on sellers and buyers of privatized SOEs.Results indicate that share of real private sector from privatized shares of SOEs is about 4.61 percent. In addition, share of non-government part of public sector was 47.1 percents of sold SOEs and a big part of privatized SOEs (38.58 percents) were sold back to hidden layers of other SOEs.In our sample, privatization has led to change of the board of directors, only in 9 state owned enterprises. In 8 cases, managerial shares (more than 30 percents of total shares) were transmitted to non-governmental public sector and just in 1 case to private sector.In sum, results do not corroborate the so-called hypothesis according to which privatization leads to expansion of private sector.