PUBLIC ENTERPRISES IN strongMIXED ECONOMIESstrong THEIR IMPACT ON SOCIAL.pdfVIP

PUBLIC ENTERPRISES IN MIXED ECONOMIES: THEIR IMPACT ON SOCIAL EQUITY (Preliminary Draft) ANDONG ZHU Assistant Professor School of Humanities and Social Sciences Tsinghua University, Beijing, 100084 Phone: 86-10 Email: andong@ Paper Prepared for IDEAs’ International Conference on ‘Economic Openness and Income Inequality: Policy Options for Developing Countries in the New Millennium’ to be held in Shanghai, China, th 21-27 August 2006 ABSTRACT Privatization is a crucial component of the neoliberal policies prevailing over much of the world in the past two and half decades. The underlying theoretical argument of these policies is that state-owned enterprises (SOEs) are inherently inefficient and therefore bad for social equity, besides hinder economic growth. However, the existing literature falls short of providing a solid theoretical basis for this argument. In fact, some argue that SOEs have the potential to contribute positively to equity. Whether SOEs can realize this potential or not is an empirical question. Unfortunately, the few existing empirical studies considering the impacts of SOEs on equity fail to offer any clear-cut conclusions. This study improves on the existing researches by utilizing a panel data set of more than 40 mixed economies for the time period from the 1960s all through the 1990s. By applying fixed effects techniques, this study empirically explores the impacts of SOEs on income equality. The main result is that SOEs contribute significantly and positively to income equality. The result from this study raise serious concerns over the desirability of indiscriminate privatization from the equity perspective.