The underlying theoretical argument of Privatization, as a crucial component of the neoliberal policies, is that state-owned enterprises (SOEs) are inherently inefficient, and therefore bad for social equity, besides hindering economic
growth. However, the existing literature falls short of providing a solid theoretical basis for this argument. This study improves upon the existing literature through utilization of a panel data set of more than 40 mixed economies for the period 1960s to the 1990s. By applying the fixed effects techniques, this study empirically explores the impact of SOEs on income equality. The conclusion arrived at, is that SOEs contribute significantly and positively to income equality. The results of this study raise serious doubts about the desirability of indiscriminate privatization from the equity perspective.

December 28, 2007.