Privatization and Nationalization Cycles

62 Pages Posted: 29 Jun 2010 Last revised: 26 Jul 2010

See all articles by Roberto Chang

Roberto Chang

Rutgers University, New Brunswick/Piscataway - Faculty of Arts and Sciences-New Brunswick/Piscataway - Department of Economics; National Bureau of Economic Research (NBER)

Constantino Hevia

Universidad Torcuato Di Tella - Departamento de Economia

Norman Loayza

World Bank - Research Department

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Date Written: June 2010

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.

Suggested Citation

Chang, Roberto and Hevia, Constantino and Loayza, Norman, Privatization and Nationalization Cycles (June 2010). NBER Working Paper No. w16126. Available at SSRN: https://ssrn.com/abstract=1630131

Roberto Chang (Contact Author)

Rutgers University, New Brunswick/Piscataway - Faculty of Arts and Sciences-New Brunswick/Piscataway - Department of Economics ( email )

75 Hamilton Street
New Brunswick, NJ 08901
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Constantino Hevia

Universidad Torcuato Di Tella - Departamento de Economia ( email )

Minones 2177
1428 Buenos Aires
Argentina

Norman Loayza

World Bank - Research Department ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

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