Table of Contents

International Handbook on the Economics of Corruption, Volume Two

International Handbook on the Economics of Corruption, Volume Two

Elgar original reference

Edited by Susan Rose-Ackerman and Tina Søreide

A companion volume to the International Handbook on the Economics of Corruption published in 2006, the specially commissioned papers in Volume Two present some of the best policy-oriented research in the field. They stress the institutional roots of corruption and include new research on topics ranging from corruption in regulation and procurement to vote buying and private firm payoffs.

Chapter 7: Privatization of Rent-Generating Industries and Corruption

Emmanuelle Auriol and Stéphane Straub

Subjects: economics and finance, economic crime and corruption, law - academic, corruption and economic crime, law and economics

Extract

Emmanuelle Auriol and Stéphane Straub1 1. Introduction Privatization of state-owned enterprises (SOEs) has been at the center of much policy and academic debate in the past few decades.2 Between 1988 and 2009, accumulated proceeds around the world exceeded $2 trillion. As Figure 7.1 shows, these proceeds grew steadily throughout the 1990s, and after a slowdown at the beginning of the 2000s, the total amount of privatization deals returned to an average of $100 billion in recent years.3 Infrastructure is one of the main areas where privatizations have taken place and, with other natural monopoly industries, is the focus of this chapter. Figure 7.2 shows the evolution of private investment commitments in energy, telecoms, transport and water and sewerage since 1990. Of these, between two-fifths (over the 1990–2000 period) and one-third (2001–08) of the total corresponded to pure divestitures.4 The rest correspond to other types of private involvement, such as concessions, which in many respects are also relevant to our analysis. Because of the magnitude of the sums involved and the involvement of both public and private agents, privatization of non-competitive industries (that is, of rent-generating sectors) is one of the main areas at risk of corruption. This is especially true in countries where rules, legal enforcement, and taxpayers’ ability and incentives to monitor public deals are weak.5 Straub (2008) reports anecdotal evidence from press reports of widespread corruption in non-competitive industries, including cases of bribery involving the French electronic group Thales in Argentina in the 1990s and...

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