Privatisation / Deregulation Flashcards
(2 cards)
1
Q
State + explain the micro effects of privatisation / deregulation.
A
- Allocative Efficiency: higher cs, lower P, higher Q, higher quality, greater choice.
- Productive Efficiency
- X-Efficiency
- Dynamic Efficiency: firms now making more profit - re-invest that.
- Stakeholder Impacts: negative stakeholder impacts. Privatisation - now firms are profit motivated - cost-cutting may occur - with W, getting rid of min W, in dangerous areas - health + safety, product safety, environmental quality, etc. Deregulation - where are laws being relaxed - if in L market - with hiring + firing laws, health + safety laws, maternity / paternity leave - welfare in work is harmed.
- Market Failures: deregulation with environmental standards - could worsen environmental market failures. Privatisation - private firms will ignore any externalities - worsening market failures.
2
Q
State + explain the macro effects of privatisation / deregulation.
A
- Productive + Dynamic Efficiency + LRAS: productive efficiency boosts LRAS, dynamic efficiency - investment boosts LRAS.
- Employment / Unemployment: if markets are more competitive may be more jobs being created, due to Q being high - L as a derived D. Or more private firms - cost-cutting - sacking workers - creating unemployment.
- Infrastructure Building: infrastructure can be built in short term - good for competitiveness + attracting FDI.
- Government Revenue: if privatisation is selling off state owned assets to private sector - increases gov revenue - reduces budget deficits + national debt.
