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Study Case 2 – Three Perspectives on State-Owned Enterprises in the Literature

– This article is provided for Educational Purposes only –

Agency view

There is a discrepancy between the objectives of managers (the agents) and of owners (the principals). Although governments may seek to maximize social welfare, their agents may lack the incentive to maximize the use of resources toward this end.

Social view: 

Governments create state-owned enterprises to address market failures and improve social welfare, mixing profitability goals with social objectives. These mixed objectives create challenges for monitoring outcomes and performance.

Political view: 

State-owned enterprises, in some cases, can be mechanisms for politicians to pursue their individual goals, often leading to economic distortion or inequitable distribution of resources.

Source: Independent Evaluation Group structured literature review.

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