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When the State Takes Over: Nationalization, Firm Performance, and Political Backlash

Author

Listed:
  • González, Felipe
  • Prem, Mounu

Abstract

We study the economic effects of a large nationalization program using newly assembled firmlevel data from Chile under Salvador Allende (1970-73). Using a difference-in-differences design, we show that nationalization substantially reduced firm performance and international business activity relative to comparable private firms. Return on assets fell sharply and importing activity declined, with negative effects concentrated in manufacturing, while firms in strategic and natural resource sectors were largely unaffected. We also document lower electoral support for the incumbent coalition in more exposed municipalities. Overall, nationalization generated sizable and uneven economic costs with significant political consequences.

Suggested Citation

  • González, Felipe & Prem, Mounu, 2026. "When the State Takes Over: Nationalization, Firm Performance, and Political Backlash," GLO Discussion Paper Series 1715, Global Labor Organization (GLO).
    • Handle: RePEc:zbw:glodps:1715
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    File URL: https://www.econstor.eu/bitstream/10419/336731/1/GLO-DP-1715.pdf
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    Keywords

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    JEL classification:

    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • N36 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy - - - Latin America; Caribbean

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