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Political Ownership

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  • Bennedsen, Morten

    (Department of Economics, Copenhagen Business School)

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    Abstract

    Political involvement in the operation of an enterprise, whether it is private or state owned, creates opportunities for interest groups to influence the allocation of resources. Resource allocation transfers rent both between unions and private owners within the firm and between these organized insiders and the disorganized taxpayers. I investigate how insiders`lobby activities distorts resource allocation in a state owned enterprise. Then I show that efficiency in labor allocation is improved when cash flow is rights affects efficiency in resource allocation when there are restrictions on side payments between the interest groups.

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    File URL: http://openarchive.cbs.dk/cbsweb/handle/10398/7563
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    Bibliographic Info

    Paper provided by Copenhagen Business School, Department of Economics in its series Working Papers with number 11-1999.

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    Length: 32 pages
    Date of creation: 18 Jul 1999
    Date of revision:
    Handle: RePEc:hhs:cbsnow:1999_011

    Contact details of provider:
    Postal: Department of Economics, Copenhagen Business School, Solbjerg Plads 3 C, 5. sal, DK-2000 Frederiksberg, Denmark
    Phone: 38 15 25 75
    Fax: 38 15 34 99
    Email:
    Web page: http://www.cbs.dk/departments/econ/
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    Related research

    Keywords: Ownership Structure; Influence Externality; Side Payments; resource Allocation;

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    References

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    1. Gene Grossman & Elhanan Helpman, 1994. "Electoral Competition and Special Interest Politics," NBER Working Papers 4877, National Bureau of Economic Research, Inc.
    2. Jean-Jacques Laffont & Jean Tirole, 1991. "Privatization and Incentives," Working papers 572, Massachusetts Institute of Technology (MIT), Department of Economics.
    3. Blanchard, O. & Aghion, P., 1996. "On insider privatization," European Economic Review, Elsevier, vol. 40(3-5), pages 759-766, April.
    4. Dixit, Avinash & Grossman, Gene M. & Helpman, Elhanan, 1997. "Common Agency and Coordination: General Theory and Application to Government Policy Making," Scholarly Articles 3450061, Harvard University Department of Economics.
    5. John Vickers & George Yarrow, 1988. "Privatization: An Economic Analysis," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262720116, December.
    6. Hart, Oliver & Shleifer, Andrei & Vishny, Robert W, 1997. "The Proper Scope of Government: Theory and an Application to Prisons," The Quarterly Journal of Economics, MIT Press, vol. 112(4), pages 1127-61, November.
    7. Aghion, Philippe & Blanchard, Olivier & Burgess, Robin, 1994. "The behaviour of state firms in eastern Europe, pre-privatisation," European Economic Review, Elsevier, vol. 38(6), pages 1327-1349, June.
    8. Tirole, Jean, 1991. "Collusion and the Theory of Organizations," IDEI Working Papers 9, Institut d'Économie Industrielle (IDEI), Toulouse.
    9. Andrei Shleifer, 1998. "State Versus Private Ownership," Harvard Institute of Economic Research Working Papers 1841, Harvard - Institute of Economic Research.
    10. Grossman, G.M. & Helpman, E., 1992. "Protection for Sale," Papers 21-92, Tel Aviv.
    11. Schmidt, Klaus M, 1996. "The Costs and Benefits of Privatization: An Incomplete Contracts Approach," Journal of Law, Economics and Organization, Oxford University Press, vol. 12(1), pages 1-24, April.
    12. Olivier Debande & Guido Friebel, 1997. "Privatization and Managerial Efficiency," William Davidson Institute Working Papers Series 39, William Davidson Institute at the University of Michigan.
    13. Boycko, Maxim & Shleifer, Andrei & Vishny, Robert W, 1996. "A Theory of Privatisation," Economic Journal, Royal Economic Society, vol. 106(435), pages 309-19, March.
    14. Persson, Torsten, 1998. "Economic Policy and Special Interest Politics," Economic Journal, Royal Economic Society, vol. 108(447), pages 310-27, March.
    15. Patrick Bolton, 1995. "Privatization and the separation of ownership and control: lessons from Chinese enterprise reform," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 3(1), pages 1-11, 03.
    16. E. Markou & C. Waddams Price, 1999. "UK utilities: Past reform and current proposals," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 70(3), pages 371-416, 09.
    17. Shleifer, Andrei & Vishny, Robert W, 1994. "Politicians and Firms," The Quarterly Journal of Economics, MIT Press, vol. 109(4), pages 995-1025, November.
    18. Roman Frydman & Andrzej Rapaczynski, 1993. "Insiders and the state: overview of responses to agency problems in East European privatizations," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 1(1), pages 39-59, 01.
    19. Schmidt, Klaus M., 1996. "The costs and benefits of privatization: An incomplete contracts approach," Munich Reprints in Economics 19773, University of Munich, Department of Economics.
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    Cited by:
    1. Bennedsen, Morten & Schultz, Christian, 2003. "Outsourcing, Market Structure and Elections," Working Papers 07-2003, Copenhagen Business School, Department of Economics.
    2. Bennedsen, Morten & Schultz, Christian, 2003. "Adaptive Contracting," Working Papers 08-2003, Copenhagen Business School, Department of Economics.

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