Farshad Momeni; Shima Hajinoroozi
Abstract
In this paper by applying the Social Order Approach developed by North, Wallis and Weingast we indicate how natural states with limited access order and rent-oriented behaviors prevent achievement of privatization goals. This study applies descriptive-analytical approach to suggest that corruption in ...
Read More
In this paper by applying the Social Order Approach developed by North, Wallis and Weingast we indicate how natural states with limited access order and rent-oriented behaviors prevent achievement of privatization goals. This study applies descriptive-analytical approach to suggest that corruption in natural states is one of main limitations to success of privatization program and then investigates the impacts of corruption on three of the most important goals of privatization: strengthening the role of productive private sector in economy, promoting productivity and improving the public sector's financial health. Natural states with rent-oriented behaviors prevent strengthening of productive private sector through disturbing business environment and distorting transfers of ownership. Also corruption makes it difficult to access the goal of promoting productivity, through distorting the motivations of productive investment and reducing the available financial resources of productive private sector to improve productivity. Transferring state firms to the private sector and releasing of resources, makes an opportunity for natural states able to benefit elites more than before. Therefore, where institutional structure is corrupted and rent-based, it is impossible to improve financial health of public sector. Investigating the experience of Iran as a country with a natural state and widespread corruption confirms the theoretical-analytical framework of the study and shows that none of the goals of privatization has been achieved. During the implementation of privatization, not only the role of private sector has not improved, but also the share of government sector has increased. Also, total factor productivity index has not changed significantly and budget deficit of government has increased along with the acceleration of transfers of ownership.
