PRIVATIZATION AND NATIONALIZATION CYCLES

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.