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"This paper studies the cycles of nationalization and privatization in resource-rich economies. We discuss available evidence on the drivers and consequences of privatization and nationalization, review the existing literature, and present illustrative case studies. Our main contribution is then to develop a static and dynamic model of the choice between private and national regimes for the ownership of natural resources. In the model, this choice is driven by a basic equality-efficiency tradeoff: national ownership results in more redistribution of income and more equality, but undermines incentives for effort. The resolution of the tradeoff depends on external and domestic conditions that affect the value of social welfare under each regime. This allows us to characterize how external variables - such as the commodity price - and domestic ones - such as the tax system - affect the choice of private vs. national regimes. The analysis therefore identifies the determinants of the observed cycles of privatization and nationalization, and is consistent with a variety of observed phenomena"--National Bureau of Economic Research web site

We study an open economy where a pro-labor and a pro-business candidate compete in an election. The winner chooses taxes, which affect investment returns. Electoral outcomes depend on the size of the foreign debt, but the debt itself reflects expectations about the election. The resulting interaction is novel and has several implications. Elections are associated with increased volatility. Politico-economic crises can occur. Inefficiencies vanish if the candidates commit to an appropriate tax policy, but such commitments have predictable effects on the election. Empirical evidence supporting the theory is discussed. (JEL D72, F34, O17, O19)

Why are some financial crises associated with political crises and some are not? Does political instability cause financial fragility or the other way around? What are the implications of political distortions for policy in countries experiencing financial turmoil? This paper studies these and other questions in a formal model of debt, default, and financial crisis. A key assumption is that the default decision is made by a government that has superior information than the public about the social costs of default. Citizens, however, can dismiss the government, and overrule its default decision, at the cost of a political crisis. If there is a divergence between the objectives of the government and its people, political crisis may emerge in equilibrium. For this to be the case, the foreign debt must be large enough, and international reserves low. When this political equilibrium is seen as a part of a larger investment problem, I show that there are equilibria in which crises are only financial, and equilibria in which default and political crises occur. In some cases, both kinds of equilibria coexist and, in this sense, a loss of confidence by foreign lenders can exacerbate the likelihood of a political crisis. If so, international intervention in financial markets may ensure financial and political stability at little cost. Policy analysis is delicate, however, and may require linking financial policies to political outcomes.