Privatization: Documenting Government Retrenchment from Production and Analyzing the Distributional Consequences

• In Event: Impacts of Taxes, Privatization, and Land Right

Abstract

This paper presents the first-ever macroeconomic evidence of the privatization of the U.S. economy.  As a social phenomenon, privatization has been widely studied and debated since the 1970s.  However, because few studies have attempted to operationalize the concept, systematic attempts to quantify the overall level of privatization in the U.S. are absent from the literature.  I remedy this by identifying how to operationalize privatization in economic indicators from the Bureau of Economic Analysis and analyzing the resulting impact among industry stakeholders.  My findings are that the U.S. productive economy has privatized substantially since 1970, while government has simultaneously been privatized from within by contracting work out to the private sector.  Autoregressive distributed lag (ARDL) regression models provide evidence that government contracting increases private-sector surplus measures, including gross operating surplus, net operating surplus, corporate profits, and shareholder dividends, but does not raise employee compensation, capital investment, or corporate income taxes paid to the federal government.  To conclude, I discuss the implications for the retrenchment of government from the U.S. productive economy.

Author

• Nathan P Meyers, University of Massachusetts at Amherst
  Presenting Author