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Privatization and Nationalization Cycles

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  • Roberto Chang
  • Constantino Hevia
  • Norman Loayza

Abstract

This paper studies the cycles of nationalization and privatization in resource-rich economies. We discuss available evidence on the drivers and consequences of privatization and nationalization, review the existing literature, and present illustrative case studies. Our main contribution is then to develop a static and dynamic model of the choice between private and national regimes for the ownership of natural resources. In the model, this choice is driven by a basic equality-efficiency tradeoff: national ownership results in more redistribution of income and more equality, but undermines incentives for effort. The resolution of the tradeoff depends on external and domestic conditions that affect the value of social welfare under each regime. This allows us to characterize how external variables — such as the commodity price — and domestic ones — such as the tax system — affect the choice of private vs. national regimes. The analysis therefore identifies the determinants of the observed cycles of privatization and nationalization, and is consistent with a variety of observed phenomena.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16126.

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Date of creation: Jun 2010
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Handle: RePEc:nbr:nberwo:16126

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  1. Guriev, Sergei & Kolotilin, Anton & Sonin, Konstantin, 2008. "Determinants of Expropriation in the Oil Sector: A Theory and Evidence from Panel Data," CEPR Discussion Papers 6755, C.E.P.R. Discussion Papers.
  2. James A. Schmitz, Jr. & Arilton Teixeira, 2004. "Privatization's impact on private productivity: the case of Brazilian iron ore," Staff Report 337, Federal Reserve Bank of Minneapolis.
  3. Shafer, Michael, 1983. "Capturing the mineral multinationals: advantage or disadvantage?," International Organization, Cambridge University Press, vol. 37(01), pages 93-119, December.
  4. Duncan, Roderick, 2006. "Price or politics? An investigation of the causes of expropriation," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 50(1), March.
  5. Robert T. Deacon & Henning Bohn, 2000. "Ownership Risk, Investment, and the Use of Natural Resources," American Economic Review, American Economic Association, vol. 90(3), pages 526-549, June.
  6. James D. Hamilton, 2009. "Understanding Crude Oil Prices," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 179-206.
  7. Boubakri, Narjess & Cosset, Jean-Claude & Guedhami, Omrane, 2005. "Liberalization, corporate governance and the performance of privatized firms in developing countries," Journal of Corporate Finance, Elsevier, vol. 11(5), pages 767-790, October.
  8. Michael S Minor, 1994. "The Demise of Expropriation as an Instrument of LDC Policy 1980-1992," Journal of International Business Studies, Palgrave Macmillan, vol. 25(1), pages 177-188, March.
  9. Perotti, Enrico C, 1995. "Credible Privatization," American Economic Review, American Economic Association, vol. 85(4), pages 847-59, September.
  10. Roderick Duncan, 2006. "Price or politics? An investigation of the causes of expropriation ," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 50(1), pages 85-101, 03.
  11. Nemat Shafik, 1996. "Selling Privatization Politically," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 3(3), pages 367-378.
  12. Nandini Gupta, 2005. "Partial Privatization and Firm Performance," Journal of Finance, American Finance Association, vol. 60(2), pages 987-1015, 04.
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As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Privatization-nationalization cycles
    by Economic Logician in Economic Logic on 2010-11-18 15:31:00
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Cited by:
  1. Stan du Plessis, 2011. "Nationalising South African mines: Back to a prosperous future, or down a rabbit hole?," Working Papers 17/2011, Stellenbosch University, Department of Economics.
  2. Polterovich, Victor, 2012. "Приватизация и рациональная структура собственности (Privatizatsiya i ratsional’naya struktura sobstvennosti)
    [Privatization and the Rational Owners
    ," MPRA Paper 41069, University Library of Munich, Germany.
  3. Voszka, Éva, 2013. "Államosítás, privatizáció, államosítás
    [Nationalization, privatization, nationalization]
    ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(12), pages 1289-1317.
  4. Hajzler, Christopher, 2014. "Resource-based FDI and expropriation in developing economies," Journal of International Economics, Elsevier, vol. 92(1), pages 124-146.
  5. Eden, Maya & Kraay, Aart & Qian, Rong, 2012. "Sovereign defaults and expropriations : empirical regularities," Policy Research Working Paper Series 6218, The World Bank.

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