Should the Commonwealth of Virginia Privatize Liquor Sales?

Abstract

Privatization is an effective policy choice for governments to reduce public debt, improve the financial health of the private sector, and improve the firm’s economic efficiency. However, beyond the economic and financial factors, there are several political implications of privatization policies that are important to consider. Although many economic benefits are presumed to occur due to privatization, the unique position of the Virginia Alcoholic Beverage Control Authority (VA ABC) makes it, unlike most public firms that have been considered for privatization. Privatizing this firm would result in the Commonwealth of Virginia losing over $250 million from its General Fund annually and would negatively impact the state’s labor market. This policy brief examines the economic, financial, and political motivations to privatize state-owned enterprises and discusses the implications that privatizing the VA ABC would have on the Commonwealth.