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Cambridge Journal of Economics Advance Access originally published online on June 12, 2006
Cambridge Journal of Economics 2007 31(2):193-215; doi:10.1093/cje/bel016
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© The Author 2006. Published by Oxford University Press on behalf of the Cambridge Political Economy Society. All rights reserved.

Finance and politics: the wealth effects of special interest group influence during the nationalisation and privatisation of Conrail

James Ang and Carol Boyer*

* Florida State University and Long Island University, respectively

Address for correspondence: Florida State University, Department of Finance, College of Business, Tallahassee, FL 32306, USA; email: jang{at}garnet.acns.fsu.edu

Conrail, nationalised in 1976 and privatised in 1987, was the most significant nationalisation and privatisation by the US government in recent years. It was created from six bankrupt railroads under the pressure of interest groups, formed by customers, existing claimants, employees and related companies. We document the gains and losses to these special interest groups at key points in the nationalised and privatised time periods. Over this period, the US government had outlays of $6.59 billion, and cash inflow of $6.15 billion, and internal return of –6.4%. The paper provides evidence that a state-owned firm with good governance could deliver superior performance.

Key Words: Political economy • Privatisation

JEL classifications: G34, G18

Manuscript received August 23, 2004; final version received November 11, 2005.


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