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Politicians and Firms

The Quarterly Journal of Economics · 1994 · Vol. 109(4) · pp. 995–1025

Andrei Shleifer✉(Harvard University Press)Robert W. Vishny(University of Chicago)

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.

Corporate Finance and Governance Merger and Competition Analysis Corporate Taxation and AvoidanceStylized factCommercializationRestructuringSubsidyEconomicsWork (physics)State (computer science)Market economyIndustrial organizationBusiness

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Political Connections and Corporate Bailouts