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Discussion Paper Details

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Title: Privatization and X-Inefficiency: A Bargaining Approach

Author(s): Jonathan Haskel and Amparo Sanchis

Publication Date: June 1995

Keyword(s): Bargaining, Privatization and X-inefficiency

Programme Area(s): Industrial Organization

Abstract: The usual analysis of privatization and X-inefficiency uses agency theory to model managerial effort. We model worker effort as determined by a bargain between firms and workers. Workers dislike effort because it lowers utility. Firms prefer high effort because it raises productivity. Public-sector firms are assumed to be social welfare maximizers and compared to private-sector firms, therefore, they bargain lower effort levels since they have the interests of consumers and workers at heart. Our model predicts that under certain conditions privatization should raise effort and so lower X-inefficiency, and that wages may increase or decrease.

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Bibliographic Reference

Haskel, J and Sanchis, A. 1995. 'Privatization and X-Inefficiency: A Bargaining Approach'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=1192