Scandinavian Working Papers in Economics

Working Papers,
Copenhagen Business School, Department of Economics

No 11-1999: POLITICAL OWNERSHIP

Morten Bennedsen
Additional contact information
Morten Bennedsen: Department of Economics, Copenhagen Business School, Postal: Department of Economics, Copenhagen Business School, Solbjerg Plads 3 C, 5. sal, DK-2000 Frederiksberg, Denmark

Abstract: Political involvement in the operation of an enterprise, whether it is private or state owned, creates opportunities for interest groups to influence the allocation of resources. Resource allocation transfers rent both between unions and private owners within the firm and between these organized insiders and the disorganized taxpayers. I investigate how insiders`lobby activities distorts resource allocation in a state owned enterprise. Then I show that efficiency in labor allocation is improved when cash flow is rights affects efficiency in resource allocation when there are restrictions on side payments between the interest groups.

Keywords: Ownership Structure; Influence Externality; Side Payments; resource Allocation

JEL-codes: D21; D23; D78; H11; L33

32 pages, July 18, 1999

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