Using its control of regulated inputs, a government agency extracts rents from a manager who undertakes an investment. Such government rent-seeking activity leads to a typical hold-up problem. Government ownership serves as a second-best commitment mechanism, through which the government agency...

China's remarkable economic growth occurred despite (1) the lack of secure property rights; and (2) government ownership of most non-state firms such as township-village enterprises. We unravel these two puzzles with a theory of ownership of firms facing state predation. We distinguish and...

Government ownership may dominate private ownership under government failure. Such dominance disappears as product markets grow mature, giving rise to the need for privatization. Buyers' limited wealth imposes a constraint on how and when privatization takes place. In particular, firms may be...