The Privatization Origins of Political Corporations
Felipe González; Mounu Prem y Francisco Urzúa I.
Documento de Trabajo IE-PUC, N° 516, 2018
Abstract: We show how the sale of state owned firms in dictatorships may lead to the creation of political corporations operating in democracies. Using several novel datasets, we characterize the privatizations of the Pinochet regime in Chile using a data driven algorithm, confirming that some state owned firms were sold underpriced to politically connected individuals. We then show how firms with crooked privatization processes grew and benefited from Pinochet and in democracy formed political connections, financed political campaigns, and were more likely to appear in the Panama Papers. These results reveal how authoritarian regimes can influence a subsequent democracy and document a way in which political corporations are created.
Keywords: corporation, privatization, rent seeking, dictatorship, democracy.