Abstract

This paper tells the story of Italian privatization process showing the effects of political influence on privatization policy reforms. Specifically, it focuses on politicians' incentive constraints when electoral rules produce short life and divided governments and fragmented parties. Two forces have operated together to persuade Italian politicians to privatize: the probability of a financial crisis in 1992 and the pressure from European Union. The presence of reformmongers, a rare species of politicians particularly concerned with reforming economic institutions, has helped to get ahead the process but traditional politicians - who benefit from State owned enterprises and monopoly rents - remain reluctant and liberalization has suffered from gradualism and 469 delays. The empirical analysis shows that, notwithstanding the sizeable amounts of divestitures, several policy acts have ony partially furthered the reduction of State influence and the control structure of privatized companies remains concentrated in a few shareholders' hands.