Capital Ownership And Its Impact On International Trade And Economic Growth: Tunisia
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Journal of Business & Economics Research – September 2006 Volume 4, Number 9
43
Capital Ownership And Its Impact On
International Trade And Economic Growth:
The Tunisian Experience
Khalifa H.
Ghali, Kuwait University, The State of...
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Journal of Business & Economics Research – September 2006 Volume 4, Number 9
43
Capital Ownership And Its Impact On
International Trade And Economic Growth:
The Tunisian Experience
Khalifa H.
Ghali, Kuwait University, The State of Kuwait
Hedi Trabelsi, Faculte des Sciences Economiques et de Gestion, Tunis - Tunisia
ABSTRACT
Despite the widespread belief that a privatized economy performs better than a centrally planned
one, there is no empirical evidence on whether changing the structure of capital ownership affects
trade and growth in developing countries.
This paper addresses this issue by analyzing and
comparing the distinctive effects of privately and publicly owned capital on international trade and
economic growth.
Based on a modified version of the neo-classical one-sector aggregate production
technology, we investigate the intertemporal interactions among the growth rate of real output,
private capital, public capital, international trade and labor.
The results of applying our
methodology to data from Tunisia suggest that private capital performs better than public capital in
promoting economic growth and international trade.
Despite the widespread belief that a privatized
economy performs better than a centrally planned one, there is no empirical evidence on whether
changing the structure of capital ownership affects trade and growth in developing countries.
This
paper addresses this issue by analyzing and comparing the distinctive effects of privately and
publicly owned capital on international trade and economic growth.
Based on a modified version of
the neo-classical one-sector aggregate production technology, we investigate the intertemporal
interactions among the growth rate of real output, private capital, public capital, international trade
and labor.
The results of applying our methodology to data from Tunisia suggest that private capital
performs better than public capital in promoting economic growth and international trade.
INTRODUCTION
he transition from centrally planned into decentralized market economies is one of the most important
economic issues of our time.
The failure of the socialist system to achieve an efficient allocation of
resources led to a strong belief that only an alteration of the economic structure could improve the well
being of a society.
The most important of these alterations is the privatization of state-owned enterprises, which in the
presence of working markets should improve the allocation efficiency of resources and the living standards.
This issue
is of particular interest to developing countries.
In the aftermath of the debt crisis, and upon recommendations by
international financial institutions, many developing countries are changing their overall development strategies to
rely more heavily on market forces.
Consequently, these countries are witnessing a large process of deregulation of
product and factor markets and the privatization of public enterprises1
.
However, while most economists believe that a privatized economy performs better than a centrally planned
one, the theoretical justification why this should be is still an open question.
This issue dates back to the famous
Hayek-Lerner-Lange debate of the 1940‟s.
The latter two authors argue that a planned economy could at least result in
as good an outcome as a market system, because it could always mimic it.
However, Hayek was convinced that the
beneficial thrives of the Schumpeterian entrepreneurship could only be exploited in a system of decentralized
individual decision making.
In addition, an important reason to privatize is that state owned firms are „politicized‟,
and the main objective of politicized firms is to satisfy interests of bureaucrats and politicians.
To prevent social
1
See Bennedsen (1998), Glaeser, Edward, and Sleifer (1998).
T
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