Politická ekonomie 2021, 69(5):511-528 | DOI: 10.18267/j.polek.1328

Optimal Share of Privatisation in a Public Monopoly with Unionised Workers

Luciano Fanti ORCID...a, Domenico Buccella ORCID...b
a Department of Economics and Management, University of Pisa, Italy
b Department of Economics, Kozminski University, Poland

In a monopoly industry with firm-union wage bargaining, we show that it is optimal to privatise a share of the public firm. The optimal privatisation share increases with the union's higher bargaining power and/or wage-orientation and, when the latter is large, full privatisation becomes socially optimal. Interestingly, the optimal privatisation share is the highest (lowest) when the government attributes a medium-low (low and high) weight to the workers' welfare, notably when the union's bargaining power and/or wage-orientation are sufficiently high. This may be counterintuitive because it implies that left-wing governments (with a weak and moderate union) tend to privatise more greatly.

Keywords: Optimal privatisation, unionised monopoly, right-to-manage bargaining
JEL classification: H44, J51, L12, L33

Received: July 21, 2020; Revised: June 8, 2021; Accepted: July 26, 2021; Published: October 22, 2021  Show citation

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Fanti, L., & Buccella, D. (2021). Optimal Share of Privatisation in a Public Monopoly with Unionised Workers. Politická ekonomie, 69(5), 511-528. doi: 10.18267/j.polek.1328
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