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The Privatization Origins of Political Corporations: Evidence from the Pinochet Regime

Published online by Cambridge University Press:  05 February 2020

Felipe González
Assistant Professor, Pontificia Universidad Católica de Chile, Instituto de Economía, Av Vicuña Mackenna 4860 Macul Santiago, Santiago 7810000, Chile. E-mail:
Mounu Prem
Adjunct Professor, Universidad Del Rosario Economics, Bogota, Colombia. E-mail:
Francisco Urzúa I
Reader in Finance, Cass Business School, City University of London, London, United Kingdom of Great Britain and Northern Ireland. E-mail:


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 regime. 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.

© The Economic History Association 2020

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We thank our discussants, Eric Hilt, Lakshmi Iyer, Paola Sapienza, and Jonathan Weigel, for their suggestions and Andrew Ellul for commenting on an early draft. We also thank Emanuele Colonnelli, Thiemo Fetzer, Gastón Illanes, Borja Larraín, Pablo Muñoz, Martín Rossi, Giorgo Sertsios, Rodrigo Soares, Juan F. Vargas, and seminar participants at various seminars and conferences. We have also benefited from conversations with politicians and army officers of the Pinochet regime and from information provided by Neville Blanc, Juan Carlos González, Miguel Landeros, and Marco Sepúlveda. We are grateful to the Center for Effective Global Action, the Economic History Association, Fondecyt (Project 11170258), and the Stanford Center for International Development for financial support. Katia Everke, Benjamin Leiva, Piera Sedini, and Cristine von Dessauer provided outstanding research assistance.


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