FEEM working papers "Note di lavoro" series
2005 .151

From Government to Regulatory Governance: Privatization and the Residual Role of the State


Autori: Enrico Perotti, Bernardo Bortolotti
Serie: Economy and Society
Editor: Fausto Panunzi
Tipo: Journal
Parole chiave: Regulatory Governance,Privatization
Numero JEL: G38,L53
JEL: World Bank Research Observer
Pagine: Vol. 22, No. 1, pp. 53-66
Data: 02/2007

Abstract

This paper reviews the state of thinking on the governance role of public ownership and control. We argue that the transfer of operational control over productive assets to the private sector represents the most desirable governance, due to the inherent difficulty for citizens to constrain political abuse relative to the ability of governments to regulate private activity. However in weak institutional environments the process needs to be structured so as to avoid capture of the regulatory process. The speed of transfer should be timed on the progress in developing a strong regulatory governance system, to which certain residual rights of intervention must be vested. After all, what are "institutions" if not governance mechanisms with some degree of autonomy from both political and private interests? The gradual creation of institutions partially autonomous from political power must become central to the development of an optimal mode of regulatory governance. We advance some suggestions about creating accountability in regulatory governance, in particular creating an internal control system based on a rotating board representative of users, producers and civil society, to be elected by a process involving frequent reporting and disclosure.

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