Why have state-owned firms been so common? One explanation, proposed in the past, is that if state firms can be induced to maximize pretax profits, then state ownership may be less inefficient than private ownership when corporate tax rates are high. If this argument were right, the capital intensity of state-owned firms should fall with privatization. The data instead show that firms lay off workers when they are privatized. Why? This Paper argues that the government can use cheap loans from state-owned banks to maintain the capital stock of privately owned firms at an efficient level, in spite of a high corporate tax rate. State-owned firms should then have the same capital intensity as equivalent privately owned firms. The Paper then argues that many other distortions to a private firm's incentives, e.g. the minimum wage, result in their employing too few low-skilled workers. State-owned firms, in contrast, can be induced to hire the desired number of such workers. This gain must be weighted against the presumed loss in productivity more generally from state ownership.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Publisher Info
Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number
2977.
Find related papers by JEL classification: H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General L30 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - General
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Boycko, Maxim & Shleifer, Andrei & Vishny, Robert W, 1996.
"A Theory of Privatisation,"
Economic Journal,
Royal Economic Society, vol. 106(435), pages 309-19, March.
[Downloadable!] (restricted)
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)