A Positive Theory of Privatisation for Sub-Saharan Africa

We build a simple positive theory of privatisation for countries where governments have private agendas. Privatisation occurs when the rulers of the country can fetch enough shares in the newly created firms to compensate them from the private benefits they were deriving from public firms. The comparative statics of the model suggests a relationship between the level of privatisation and the level of corruption which has an inverted U-shape. A brief look at data from Sub-Saharan Africa does not reject this hypothesis.