Editing State ownership (section)

== Criticism ==
In [[neoclassical economic theory]], the desirability of state ownership has been studied using [[contract theory]]. According to the property rights approach based on [[Incomplete contracts|incomplete contracting]] (developed by [[Oliver Hart (economist)|Oliver Hart]] and his co-authors), ownership matters because it determines what happens in contingencies that were not considered in prevailing contracts.<ref>{{Cite web|title=Firms, Contracts, and Financial Structure |url=https://ideas.repec.org/b/oxp/obooks/9780198288817.html |publisher=Oxford University Press |date=1995 |first=Oliver |last=Hart}}</ref>

The work by Hart, Shleifer and Vishny (1997) is the leading application of the property rights approach to the question whether state ownership or private ownership is desirable.<ref>{{cite journal |title=The Proper Scope of Government: Theory and an Application to Prisons |journal=The Quarterly Journal of Economics |date=1997 |issn=0033-5533 |pages=1127–1161 |volume=112 |issue=4 |doi=10.1162/003355300555448 |language=en |first1=Oliver |last1=Hart |first2=Andrei |last2=Shleifer |first3=Robert W. |last3=Vishny|s2cid=16270301 |url=https://dash.harvard.edu/bitstream/1/30727607/1/w5744.pdf }}</ref> In their model, the government and a private firm can invest to improve the quality of a public good and to reduce its production costs. It turns out that private ownership results in strong incentives to reduce costs, but it may also lead to poor quality. Hence, depending on the available investment technologies, there are situations in which state ownership is better. The Hart-Shleifer-Vishny theory has been extended in many directions. For instance, some authors have also considered mixed forms of private ownership and state ownership.<ref>{{cite journal |title=Public versus private ownership: Quantity contracts and the allocation of investment tasks |journal=Journal of Public Economics |date=2010 |pages=258–268 |volume=94 |issue=3–4 |doi=10.1016/j.jpubeco.2009.11.009 |first1=Eva I. |last1=Hoppe |first2=Patrick W. |last2=Schmitz}}</ref> In the Hart-Shleifer-Vishny model it is assumed that all parties have the same information, while Schmitz (2023) has studied an extension of their analysis allowing for [[Information asymmetry|asymmetric information]].<ref>{{Cite journal |last=Schmitz |first=Patrick W. |date=2023 |title=The proper scope of government reconsidered: Asymmetric information and incentive contracts |journal=European Economic Review |language=en |volume=157 |pages=104511 |doi=10.1016/j.euroecorev.2023.104511 |s2cid=259487043 |issn=0014-2921|doi-access=free |url=https://mpra.ub.uni-muenchen.de/117742/1/Proper-Scope-of-Gov-Asym-Inform_DP.pdf }}</ref> Moreover, the Hart-Shleifer-Vishny model assumes that the private party derives no utility from provision of the public good. Besley and Ghatak (2001) have shown that if the private party (a non-governmental organization) cares about the public good, then the party with the larger valuation of the public good should always be the owner, regardless of the parties' investment technologies.<ref>{{cite journal |title=Government versus Private Ownership of Public Goods |jstor=2696461 |journal=The Quarterly Journal of Economics |date=2001 |pages=1343–1372 |volume=116 |issue=4 |first1=Timothy |last1=Besley |first2=Maitreesh |last2=Ghatak |doi=10.1162/003355301753265598|s2cid=39187118 |citeseerx=10.1.1.584.6739}}</ref>

More recently, some authors have shown that the investment technology also matters in the Besley-Ghatak framework if an investing party is indispensable<ref>{{cite journal |title=Nature of human capital, technology and ownership of public goods |journal=Journal of Public Economics |date=2012 |pages=939–945 |volume=96 |series=Fiscal Federalism |issue=11–12 |doi=10.1016/j.jpubeco.2012.07.005 |first=Maija |last=Halonen-Akatwijuka|s2cid=154075467 |citeseerx=10.1.1.173.3797 }}</ref> or if there are bargaining frictions between the government and the private party.<ref>{{Cite journal |title=Government versus private ownership of public goods: The role of bargaining frictions |journal=Journal of Public Economics |date=2015 |pages=23–31 |volume=132 |doi=10.1016/j.jpubeco.2015.09.009 |first=Patrick W. |last=Schmitz|doi-access=free }}</ref>