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State Owned Enterprises and Redistribution: An Empirical Analysis

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  • Cem Karayalcin

    ()
    (Department of Economics, Florida International University)

  • Mehmet A. Ulubasoglu

    ()
    (Department of Economics, Deakin University)

Abstract

In the past decade many developing economies started to privatize their state owned enterprises. Recently, however, this process seems to have slowed down in some economies and have completely been stalled in others. Here we formalize the view that this is so because these enterprises are major instruments of income redistribution and, in economies with significant degrees of income inequality, segments of the population that benefit from this redistribution would use whatever political power they may have to oppose its abandonment. We find strong and robust empirical support for this hypothesis using cross-country data on the relative size of the state-owned-enterprise sector and different measures of inequality. We also find support for the propositions that dictatorships as well as democracies use this redistributive tool and that left-wing governments tend to redistribute more than right-wing governments through state owned enterprises.

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File URL: http://casgroup.fiu.edu/pages/docs/2247/1275232455_05-11.pdf
File Function: First version, 2005
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Bibliographic Info

Paper provided by Florida International University, Department of Economics in its series Working Papers with number 0511.

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Length: 32 pages
Date of creation: Jul 2005
Date of revision:
Handle: RePEc:fiu:wpaper:0511

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Keywords: state-owned enterprises; inequality; redistribution; political economy;

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  8. Coate, Stephen & Morris, Stephen, 1995. "On the Form of Transfers in Special Interests," Journal of Political Economy, University of Chicago Press, vol. 103(6), pages 1210-35, December.
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