Privatisation and capital accumulation: emperical evidences from Ethiopia

Abstract

This paper examines the connectivity between privatisation and private capital accumulation. Many previous studies lzave proved tllat privatisatiorr lras had a direct and positive effect on capital ncc~murlation through aftrncting privnte investn~errt. Ethiopia, one of the least cleveloped corlrrtries (LDCs), and ltaving spent t~vo decades of conrmunisnr, 11as irnpletrrerzted privatisatiorr programme as a tneans of nttractirtg a sizable itzvestmer~t sr~clr as the foreign direct investrrrertt (FDI). We rrsed data over tert years, 1994195 to 2003/04, and applied correlation and regression analyses to establisl~ the effect of the Ethiopian privatisntion programme on capital accumulation. The empirical results show that privatisation is robustly negative to capital accumulation. We suggest that the corintry needs to improve economic and political stability as well as openness coupled ~vitlr revitnlising tlre priwtisntion progranvne to prevent the Ethiopian eco~ronry front further capital sabotage.