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Nationalizations and effciency

  • Crivelli, Ernesto
  • Staal, Klaas

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

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File URL: https://epub.ub.uni-muenchen.de/13284/1/268.pdf
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Paper provided by Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich in its series Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 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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  1. Bengt Holmstrom & Paul R. Milgrom, 1985. "Aggregation and Linearity in the Provision of Intertemporal Incentives," Cowles Foundation Discussion Papers 742, Cowles Foundation for Research in Economics, Yale University.
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  7. Eric S. Maskin, 1999. "Recent Theoretical Work on the Soft Budget Constraint," American Economic Review, American Economic Association, vol. 89(2), pages 421-425, May.
  8. Lin, Justin Yifu & Li, Zhiyun, 2008. "Policy burden, privatization and soft budget constraint," Journal of Comparative Economics, Elsevier, vol. 36(1), pages 90-102, March.
  9. Jean-Jacques Laffont & Jean Tirole, 1991. "Privatization and Incentives," Working papers 572, Massachusetts Institute of Technology (MIT), Department of Economics.
  10. Kornai, Janos, 2001. "Hardening the budget constraint: The experience of the post-socialist countries," European Economic Review, Elsevier, vol. 45(9), pages 1573-1599, October.
  11. Mathias Dewatripont & Gérard Roland, 2000. "Soft budget constraints, transaction and financial systems," ULB Institutional Repository 2013/9625, ULB -- Universite Libre de Bruxelles.
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