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

Felipe Gonzalez and Mounu Prem

No 21353, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We study the economic effects of a large nationalization program using newly assembled firm-level 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.

Keywords: Nationalization; State-owned enterprises; Firm performance (search for similar items in EconPapers)
JEL-codes: D72 L33 N36 (search for similar items in EconPapers)
Date: 2026-04
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