Finance and politics: the wealth effects of special interest group influence during the nationalisation and privatisation of Conrail

Conrail, nationalised in 1976 and privatised in 1987, was the most significant nationalisation and privatisation by the US government in recent years. It was created from six bankrupt railroads under the pressure of interest groups, formed by customers, existing claimants, employees and related companies. We document the gains and losses to these special interest groups at key points in the nationalised and privatised time periods. Over this period, the US government had outlays of $6.59 billion, and cash inflow of $6.15 billion, and internal return of -6.4%. The paper provides evidence that a state-owned firm with good governance could deliver superior performance.