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The missing shock: the macroeconomic impact of British privatisation
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The missing shock: the macroeconomic impact of British privatisation

Author

Listed:
  • Massimo Florio
  • Mara Grasseni

Abstract

The privatisation policy pursued in the UK by Mrs Thatcher's government (1979-1990) and subsequently by Mr Major's government (1990-1997) was the largest experiment in public divestitures among capitalist economies. It had a deep impact on economic policy-making worlwide, and was vastly imitated, in Western Europe, in the former planned economies, in a number of less developed countries. In this paper we test the impact of privatisation on macroeconomic performance in the United Kingdom using quarterly data from 1979 to 1999. In the econometric model, we use privatisation proceeds as an explanatory variable and we control for several other variables. Testing for cointegration the results show that there is a long run equilibrium relationship between GDP growth and the variables used in the model. However, in our empirical analysis we find a weak evidence that privatisation generated an aggregate shock on output in the UK. This result is consistent with empirical literature on microecononmic evidence that shows that in the UK ownership change per se had little impact on long term productivity trends.

Suggested Citation

  • Massimo Florio & Mara Grasseni, 2003. "The missing shock: the macroeconomic impact of British privatisation," Departmental Working Papers 2003-021, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
    • Handle: RePEc:mil:wpdepa:2003-021
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    More about this item

    Keywords

    Privatisation; United Kingdom; GDP growth;
    All these keywords.

    JEL classification:

    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
    • H82 - Public Economics - - Miscellaneous Issues - - - Governmental Property
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out

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