ECON-2220 Lecture Notes - Lecture 6: Collegehumor, Human Capital, Oligopoly
15 May 2018
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Readings:
Viewpoint Privatization Trends, The Privatization Paradox, Nationalization for the Poor, Reel,
Turning the Taps Back to the States
Study Guide on LAC Privatization (2 articles)
1) What kinds of companies were privatized in LAC during the 1990s?
Water, postal services, telecommunications, electricity, fuel
2) According to the Nationalization for the Poor article, provide some examples on how
privatization had benefited the LAC society. –– there were 7 examples
● important benefits in the areas of health, time management and employment
● In Argentina, even with higher prices, better service saved them both time and money.
○ Also in Argentina, there was a link between electricity privatization and healthier
children (refrigerator reliability)!
○ In Argentina, even though the price increase, privatization of water services
benefited citizens
■ There were many neighborhoods that didn’t have water services before
privatization
■ Decreased illnesses
● In Peru, electricity privatization has been a blessing for farmers and poor rural workers.
Thanks to more continuous and reliable electricity service
○ Farmers and poor rural workers benefited because service was more continuous
and more reliable so users could save time on agricultural work and use it partly
for nonagricultural or leisure activities, thereby boosting both income and general
wellbeing
● Telephone service in Peru
○
3) Privatizations of some SOEs can be socially very beneficial. In spite of some tangible
benefits, two out of every three Latin Americans say privatization has been bad for them
and their countries. What accounts for this apparent paradox?
● The answer probably lies in the cloud of corruption that has overcast some of the more
notorious privatization cases or the scandalous enrichment of a few individuals or
companies involved.
● Job losses are also to blame, as some workers are necessarily displaced when
economic, rather than political, criteria are used in making employment and investment
decisions.
● Lack of government regulation previous to privatizations
○ Governments didn’t prepare laws to protect consumers
4) Did privatization improve productivity and efficiency?
● In most cases, the objective was achieved and the data show that after nearly two
decades, privatization considerably improved the profitability and efficiency of the
affected companies.
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