Politicians and Firms

Andrei Shleifer and Robert W. Vishny

The Quarterly Journal of Economics, 1994, vol. 109, issue 4, 995-1025

Abstract: We present a model of bargaining between politicians and managers that explains many stylized facts about the behavior of state firms, their commercialization, and privatization. Subsidies to public enterprises and bribes from managers to politicians emerge naturally in the model. We use the model and several extensions to understand why commercialization and privatization might work, and what forces contribute to effective restructuring of public enterprises. We illustrate the model using examples from several countries.

Date: 1994
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The Quarterly Journal of Economics is currently edited by Robert J. Barro, Lawrence F. Katz, Nathan Nunn, Andrei Shleifer and Stefanie Stantcheva

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