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Thresholds in natural resource rents and state owned enterprise profitability: Cross country evidence

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  • Lim, King Yoong
  • Morris, Diego

Abstract

In this paper we contribute to the resource curse literature by examining the association between state owned enterprises (SOE) profitability and natural resource rents. We use data on 91,094 firms across 36 industries in 101 countries to show that although SOEs are inherently less productive compared to privately owned enterprises (POEs), there exists a threshold value of natural resource rents windfall above which SOEs would outperform POEs profitability. This threshold value of natural resource windfall we find to be between 138.6% and 192.3% above the long-term median value of resource rents. We argue that this threshold may exist because of: (i) at the country level, higher level of natural resource rents allocation that is reinvested domestically in the form of SOE capital investments; and (ii) at the industry level, SOEs experience higher scale economies through production linkages to the natural resource sector.

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  • Lim, King Yoong & Morris, Diego, 2022. "Thresholds in natural resource rents and state owned enterprise profitability: Cross country evidence," Energy Economics, Elsevier, vol. 106(C).
    • Handle: RePEc:eee:eneeco:v:106:y:2022:i:c:s0140988321006186
    DOI: 10.1016/j.eneco.2021.105779
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    More about this item

    Keywords

    Profitability; Energy; Natural resource rents; State-owned enterprises; Privately-owned enterprises;
    All these keywords.

    JEL classification:

    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L32 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Public Enterprises; Public-Private Enterprises
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics
    • O25 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Industrial Policy

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