Public vs. Private Sector – An Examination of Neo-strongLiberalstrong.pdfVIP

Public vs. Private Sector – An Examination of Neo-Liberal Ideology Dr. Iram Khan1 Abstract The paper reviews the theoretical underpinnings of the debate on the superiority of the public or private sector, and supports theoretical perspectives with help from empi rical literature on the subject. The theoretical part covers issues relating to public choice, property rights and principal-agents relationship, while the empirical evidence includes review of literature on macroeconomic, microeconomic and welfare impacts of privatisation. The paper finds that despite numerous studies and unending discussions, the debate on the superiority of the public or private sector has remained inconclusive and is likely to remain so in the future. Notwithstanding the practical difficulties of making this assessment, the paper concludes that this debate is more ideological rather than empirical, since it is not possible to determine the superiority of one over the other through case studies, which can only be selective in nature. 1. INTRODUCTION The last two decades have seen a wave of economic reforms designed to reduce the role of the public sector and expand the role of the market (Cook Kirkpatrick, 1988). While the boundaries of the private sector are rather clearly delineated, those of the public sector are relatively obscure. In the public-private sector continuum, government departments and ministries lie on one side of the pole with the profit-oriented commercial private firms on the other. The remaining enterprises lie somewhere in between. Public enterprises, called bo