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  • Roberto Chang (a1), Constantino Hevia (a2) and Norman Loayza (a3)


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.


Corresponding author

Address corresponding to: Roberto Chang, Department of Economics, Rutgers University, New Brunswick, NJ 08901, USA; e-mail:


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For excellent research assistance, we are grateful to Luis Fernando Castro, Teresa Fort, Claudia Meza-Cuadra, and Tomoko Wada. We also thank Yuki Ikeda for editorial assistance. We have benefitted from insightful conversations and comments from Ximena Del Carpio, Tito Cordella, Eduardo Engel, Aart Kraay, Justin Lin, Osmel Manzano, Juan Antonio Morales, Claudio Raddatz, Roberto Rigobón, Luis Servén, the journal's editor and referees, and seminar participants at the World Bank, the Atlanta Fed, the Inter-American Development Bank, Universidad Torcuato di Tella, and the Conference on Development Economics, Bolivia 2009. We gratefully recognize the financial support from the World Bank's Knowledge for Change Program and the Latin America and Caribbean Flagship Report on “The Role of Commodities.” The views expressed in this paper are those of the authors, and do not necessarily reflect those of the World Bank, their Boards of Directors, or the countries they represent.



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