In October 2013 the British government privatised Royal Mail, one of the oldest state-owned enterprises (SOEs) in Europe. Privatisation was done through flotation on the stock exchange, with employees obtaining 10% of the shares free of charge. The privatisation was a great success as far as demand for shares was concerned: investors oversubscribed for the shares and the government ended up selling more than it initially intended. But was it a good idea to sell this company?
More generally, what are the pros and cons of privatisation? And what do data tell us about the actual benefits and risks of privatisation? This article first discusses the reasons why governments want to privatise the companies they directly control, and the fears associated with privatisation. It then presents research findings on the effects of privatisation on firm performance and on workers.
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