The Privatization Origins of Political Corporations
55 Pages Posted: 15 May 2018 Last revised: 19 May 2019
Date Written: May 16, 2019
We show that the sale of state owned firms in dictatorships can help political corporations to emerge and persist over time. Using new data, we characterize Pinochet’s privatizations in Chile and find that some firms were sold underpriced to politically connected buyers. These newly private firms benefited financially from the Pinochet dictatorship. Once democracy arrived, they formed connections with the new government, financed political campaigns, and were more likely to appear in the Panama Papers. These findings reveal how dictatorships can influence young democracies using privatization reforms.
Keywords: firms, privatization, dictatorship, democracy
JEL Classification: D2, G2, G3, M2, N86
Suggested Citation: Suggested Citation