Economics of state ownership Flashcards

1
Q

Nationalisation

A

The transfer of ownership from the private sector to a state owned enterprise

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2
Q

State owned industry

A

Industry that is owned and operated by the government of a country. These industries are often established to provide goods or services that are of strategic importance or that are in the public or social interest. e.g. NHS, Network rail

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3
Q

Nationalisation advantages

A

-Ensures essential services are operated in public interest rather than for private profit
-Resources can be more evenly distributed to achieve greater allocative efficiency
-Focuses on providing high quality services rather than profits

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4
Q

Nationalisation disadvantages

A

-Lack of incentive for innovation and cost-effectiveness
-Lack of innovation
-Risk aversion
-Misallocation of resources-overstaffing or underutilisation of resources

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5
Q

Privitisation

A

The transfer of ownership of a state owned enterprise to the private sector e.g. the sale of BT or British gas

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6
Q

Pros of privitisation

A

-Modernisation and efficiency improves performance
-Makes it easier to introduce contestability to a sector
-Reduction of government spending
-Raises revenue and profits

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7
Q

Cons of privitisation

A

-Decline in service quality as profits may be prioritised
-Job losses to increase efficiency and lower costs
-Higher prices pushed onto consumers to increase revenue and profits

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