What Role for Learning? The Diffusion of Privatisation in OECD and Latin American Countries

Abstract

In this paper, I enquire whether 37 governments in industrial and in Latin American countries privatised as a result of learning from experience. Using a rational updating model, I examine whether the decision in the 1980s and 1990s to streamline the public sector was the outcome of a revision of beliefs about the effectiveness of privatisation or whether, alternatively, it was triggered by international pressures or mimicry. The results suggest that rational learning and especially emulation were two important factors in the decision to privatise. International pressures, here proxied by the presence or absence of an agreement with the International Monetary Fund and by European Union membership, are irrelevant to explanations of the decision to privatise. Finally, domestic political conditions appear relevant to the decision to launch privatisation but only when the analysis is carried out for each of the regional sub-samples. In the OECD countries, centre-left governments were more likely to privatise whereas in Latin American more repressive regimes were more willing to divest.