Delayed Privatization

This paper studies the timing of privatization in 21 major developed economies in the 1977–2002 period. Duration analysis shows that political fragmentation plays a significant role in explaining government’s decision to privatize: privatization is delayed longer in democracies characterized by a larger number of parties and operating under proportional electoral rules, as predicted by war of attrition models of economic reform. Results are robust to various assumptions on the underlying statistical model and to controlling for other economic and political factors.