Last Updated:
25 May 2017

The Effects of Privatization on Firms and on Social Welfare: The Chilean Case

This study analyzes the Chilean privatization process. After a historic review of the privatization process, we examine the 37 Chilean state-owned enterprises (SOEs) that were privatized from 1981-2000 and for which pre-privatization and post-privatization financial, employment and production data are available. We find that privatized firms enjoyed significant improvements in efficiency, but that these gains were no different than those experienced by other private firms in their respective economic sectors. This allows us to conclude that Chilean SOEs were efficient before privatization. In terms of profitability, privatized firms in the regulated sector enjoyed particularly sizeable gains. In fact, employment in those firms increased after  privatization, suggesting that they were not overstaffed under government control.



Knowledge Lab