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Nationalizations and efficiency

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Author Info
Ernesto Crivelli (Fiscal Affairs Department, Washington DC)
Klaas Staal () (IIW, University of Bonn)
Abstract

We develop a theoretical model in which firms are either private or state-owned. When firms become insolvent, the government can intervene with general mea- sures, like subsidies, or by nationalizing firms. The government only intervenes when the bankruptcy of a firm entails social costs. In a stylized model, we an- alyze how government interventions affect allocative and productive efficiency. Nationalization of private firms in case unprofitable investments were made, leads to increased allocative efficiency despite private ownership. The effort level chosen by the managers working for firms is also affected by government intervention with an impact on productive efficiency.

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Paper provided by SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich in its series Discussion Papers with number 268.

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Date of creation: Jul 2009
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Handle: RePEc:trf:wpaper:268

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Related research
Keywords: nationalization; efficiency;

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Find related papers by JEL classification:
L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Boundaries of Public and Private Enterprise; Privatization; Contracting Out
P31 - Economic Systems - - Socialist Institutions and Their Transitions - - - Socialist Enterprises and Their Transitions
P51 - Economic Systems - - Comparative Economic Systems - - - Comparative Analysis of Economic Systems

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    Other versions:
  4. 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.
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  10. Schmidt Klaus M. & Schnitzer Monika, 1993. "Privatization and Management Incentives in the Transition Period in Eastern Europe," Journal of Comparative Economics, Elsevier, vol. 17(2), pages 264-287, June. [Downloadable!] (restricted)
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