External Constraints Matter for Privatizations

We present an analysis of the share of public ownership in product markets in the OECD countries from 1974 to 2007. We replicate the analysis of Galasso (2014) by sector of activity taking into account both the dynamic bias of lagged public ownership and the degree of state ownership at the beginning of the period. At the aggregate level, both persistence and initial conditions play a major role, together with the European Single Market Programme membership. At the sector level, EMU members have a smaller share of public ownership in electricity, telecom and post, and a higher share in the rail sector. SMP members have less public ownership in telecoms. The countries in our sample tend to privatize mainly when decisions taken at the supranational level (the EU for European countries) push towards this policy.