BPE October 18, 2018

What are the long-term benefits of privatisation on the economy and job creation efforts?

The sale of public enterprises would reduce the level of employment in the short-run, because of the elimination of excess labour. Unemployment, however, is expected to decrease in the medium- and long-run as the rate of growth of the economy increases along with the growth of the private sector.

The implications of privatisation from the larger perspective can be stated as follows:

• Improves public sector’s financial health, leads to lower deficits and lower debt;
• Reduces transfer of money to public enterprises in the aggregate. These transfers become positive if the government actually starts collecting taxes from privatized firms; and
• Has a positive impact on the development of the financial sector.