Three hypothesis summarise the relationship between privatisation and economic efficiency: first, that privatisation will increase within a context of increasing market competition; second, that efficiency will rise through an improvement in managerial incentives: third, that restructuring, rather than privatisation per se, is the key to efficiency improvements. In this paper we use a sample of Spanish public sector firms to test these three hypothesis for the penod 1978-1990. Our results suggest that both competition and restructuring have a positive effect on productivity growth and that the effect of privatisation on productivity growth is not very strong.

Kevwords: privatisation, efficiency, productivity, public firm.