Nationalizations and efficiency

Ernesto Crivelli and Klaas Staal ()
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Ernesto Crivelli: Fiscal Affairs Department, Washington DC
Klaas Staal: IIW, University of Bonn

No 268, Discussion Papers from 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

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.

Keywords: nationalization; efficiency (search for similar items in EconPapers)
JEL-codes: L33 P31 P51 (search for similar items in EconPapers)
Date: 2009-07
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