Hostname: page-component-78c5997874-g7gxr Total loading time: 0 Render date: 2024-11-04T18:40:48.914Z Has data issue: false hasContentIssue false
  • English
  • Français

PRIVATIZATION AND NATIONALIZATION CYCLES

Published online by Cambridge University Press:  23 June 2017

Roberto Chang ,
Constantino Hevia  and
Norman Loayza
Roberto Chang*
Affiliation:
Rutgers University and NBER
Constantino Hevia
Affiliation:
Universidad Torcuato di Tella
Norman Loayza
Affiliation:
World Bank
*
Address corresponding to: Roberto Chang, Department of Economics, Rutgers University, New Brunswick, NJ 08901, USA; e-mail: [email protected].
Get access Rights & Permissions [Opens in a new window]

Abstract

This paper studies cycles of nationalization and privatization in resource-rich economies. It starts with a synthesis of available evidence on the drivers and consequences of privatization and nationalization. Then it develops a dynamic model of the choice between private and national regimes for the ownership of natural resources. The choice is driven by a basic equality-efficiency trade-off: national ownership results in more redistribution of income and more equality but undermines incentives for effort. We discuss how the resolution of the trade-off depends on external variables—such as the commodity price—and domestic ones—such as the tax system. The model thus identifies the determinants of the observed cycles of privatization and nationalization and is consistent with key stylized facts.

Keywords

PrivatizationNationalizationInstitutionsNatural ResourcesOil
Type
Articles
Information
Macroeconomic Dynamics , Volume 22 , Issue 2 , March 2018 , pp. 331 - 361
Copyright
Copyright © Cambridge University Press 2017 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

For excellent research assistance, we are grateful to Luis Fernando Castro, Teresa Fort, Claudia Meza-Cuadra, and Tomoko Wada. We also thank Yuki Ikeda for editorial assistance. We have benefitted from insightful conversations and comments from Ximena Del Carpio, Tito Cordella, Eduardo Engel, Aart Kraay, Justin Lin, Osmel Manzano, Juan Antonio Morales, Claudio Raddatz, Roberto Rigobón, Luis Servén, the journal's editor and referees, and seminar participants at the World Bank, the Atlanta Fed, the Inter-American Development Bank, Universidad Torcuato di Tella, and the Conference on Development Economics, Bolivia 2009. We gratefully recognize the financial support from the World Bank's Knowledge for Change Program and the Latin America and Caribbean Flagship Report on “The Role of Commodities.” The views expressed in this paper are those of the authors, and do not necessarily reflect those of the World Bank, their Boards of Directors, or the countries they represent.

References

REFERENCES

Albornoz, Facundo, Galiani, Sebastian, and Heymann, Daniel (2012) Foreign investment and expropriation under oligarchy and democracy. Economics and Politics 24, 24–46.Google Scholar
Alexeev, Michael and Conrad, Robert (2009) The elusive curse of oil. The Review of Economics and Statistics 91 (3), 586–598.Google Scholar
Alexeev, Michael and Conrad, Robert (2011) The natural resource curse and economic transition. Economic Systems 35, 445–461.Google Scholar
Atkinson, Giles and Hamilton, Kirk (2003) Savings, growth and the resource curse hypothesis. World Development 31 (11), 1793–1807.Google Scholar
Auty, Richard (2001a) Resource Abundance and Economic Development. Oxford: Oxford University Press.Google Scholar
Auty, Richard (2001b) The political economy of resource driven growth. European Economic Review 45, 839–846.CrossRefGoogle Scholar
Biglaiser, Glen and Danis, Michelle (2002) Privatization and democracy. The effects of regime type in the developing world. Comparative Political Studies 35 (1), 83–102.Google Scholar
Brainerd, Elizabeth (2002) Five years after: the impact of mass privatization on wages in Russia, 1993–1998. Journal of Comparative Economics 30 (1), 160–190.Google Scholar
Bulte, Erwin, Damania, Richard and Deacon, Robert (2005) Resource intensity, institutions, and development. World Development 33 (7), 1029–1044.Google Scholar
Chang, Roberto, Hevia, Constantino, and Loayza, Norman V. (2010) Privatization and nationalization cycles. NBER Working Paper No. 16126, Cambridge, MAGoogle Scholar
Chong, Alberto and López-de-Silanes, Florencio (2003) Privatization and labor force restructuring around the world. IDB Working Paper Series, Washington, DC.Google Scholar
Chong, Alberto and López-de-Silanes, Florencio (2005) Privatization in Latin America: Myths and Reality. Washington, DC: Stanford Economics and Finance: World Bank.Google Scholar
Chua, Amy L. (1995) The privatization-nationalization cycle: The link between markets and ethnicity in developing countries. Columbia Law Review 95 (2), 223–303.Google Scholar
Dewenter, Kathryn L. and Malatesta, Paul H. (2001) State-owned and privately owned firms: an empirical analysis of profitability, leverage, and labor intensity. American Economic Review 91 (1), 320–334.Google Scholar
Duncan, Roderick (2006) Price or politics? an investigation of the causes of expropriation. The Australian Journal of Agricultural and Resource Economics 50 (1), 85–101.Google Scholar
Galal, Ahmed, Jones, Leroy, Tandon, Pankaj, and Vogelsang, Ingo (1994) Welfare Consequences of Selling Public Enterprises: An Empirical Analysis - A Summary. Washington, DC: World Bank.CrossRefGoogle Scholar
Guriev, Sergei, Kolotilin, Anton, and Sonin, Konstantin (2011) Determinants of nationalization in the oil sector: a theory and evidence from panel data. Journal of Law, Economics, & Organization 27 (2), 301–323.Google Scholar
Holmström, Bengt (1979) Moral hazard and observability. The Bell Journal of Economics 10 (1), 74–91.Google Scholar
Jensen, Nathan (2008) Political risk, democratic institutions, and foreign direct investment. The Journal of Politics 70 (04), 1040–1052.Google Scholar
Kobrin, Stephen J. (1984) Expropriation as an attempt to control foreign firms in LDCs: Trends from 1960 to 1979. International Studies Quarterly 28 (3) 329–348.Google Scholar
La Porta, Rafael and López-de-Silanes, Florencio (1999) The benefits of privatization: Evidence from Mexico. The Quarterly Journal of Economics 114 (4), 1193–1242.CrossRefGoogle Scholar
Li, Quan (2009) Democracy, autocracy, and expropriation of foreign direct investment. Comparative Political Studies 42 (8), 1098–1127.Google Scholar
Mahdavi, Paasha (2014) Why do leaders nationalize the oil industry? The politics of resource expropriation. Energy Policy 75, 228–243.Google Scholar
Manzano, Osmel and Monaldi, Francisco (2008) The political economy of oil production in Latin America. Economia 9 (1), 59–98.Google Scholar
Manzano, Osmel and Rigobon, Roberto (2007) Resource curse or debt overhang? In Lederman, Daniel and Maloney, William F. (eds.), Natural Resources. Neither Curse nor Destiny. Palo Alto, CA: Stanford University Press.Google Scholar
Minor, Michael S. (1994) The demise of expropriation as an instrument of LDC policy, 1980–1992. Journal of International Business Studies 25 (1), 177–188.Google Scholar
Noguera, José (2013) Oil prices: breaks and trends. Energy Economics 37, 60–67.Google Scholar
Perotti, Enrico (1995) Credible privatization. The American Economic Review 85 (4), 847–859.Google Scholar
Rigobon, Roberto (2010) Dealing with expropriations: General guidelines for oil production contracts. In Hogan, William and Sturzenegger, Federico (eds.), The Natural Resources Trap: Private Investment Without Public Commitment. Cambridge, MA: MIT Press.Google Scholar
Rogerson, William (1985) The first-order approach to principal-agent problems. Econometrica, 53 (6), 1357–1367.Google Scholar
Sachs, Jeffrey and Warner, Andrew (1995) Natural resource abundance and economic growth. NBER Working paper No. 5398, Cambridge, MAGoogle Scholar
Shafik, Nemat (1996) Selling privatization politically. The Columbia Journal of World Business 31 (4), 20–29.Google Scholar
Stroebel, Johannes and van Benthem, Arthur (2013) Resource extraction contracts under threat of expropriation: theory and evidence. The Review of Economics and Statistics 95 (5), 1622–1639.Google Scholar
Vining, Aidan R. and Boardman, Anthony E. (1992) Ownership versus competition: Efficiency in public enterprise. Public Choice 73 (2), 205–239.Google Scholar
Wolf, Christian (2009) Does ownership matter? The performance and efficiency of state oil vs. private oil (1987–2006). Energy Policy 37 (7), 2642–2652.Google Scholar
Zhao, Yaohui (2002) Earnings differentials between state and non-state enterprises in urban China. Pacific Economic Review 7 (1), 181–197.Google Scholar