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Optimal Production Tax in a Mixed Market with an Endogenous Market Structure

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  • Susumu Cato
  • Toshihiro Matsumura

Abstract

We investigate how the optimal production tax rate is affected by privatization policies in a mixed oligopoly in which a state‐owned public firm competes against private firms in a free‐entry market. First, we investigate the domestic private firm case. The optimal tax rate is strictly positive except for the full privatization and full nationalization cases, and the relationship between the optimal tax rate and degree of privatization is an inverted U‐shape. Next, we investigate the foreign private firm case and find that the non‐monotonic relationship disappears.

Suggested Citation

  • Susumu Cato & Toshihiro Matsumura, 2019. "Optimal Production Tax in a Mixed Market with an Endogenous Market Structure," Manchester School, University of Manchester, vol. 87(4), pages 578-590, July.
    • Handle: RePEc:bla:manchs:v:87:y:2019:i:4:p:578-590
    DOI: 10.1111/manc.12266
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    Cited by:

    1. Yi Liu & Toshihiro Matsumura & Chenhang Zeng, 2021. "The relationship between privatization and corporate taxation policies," Journal of Economics, Springer, vol. 133(1), pages 85-101, June.
    2. Junichi Haraguchi & Toshihiro Matsumura, 2020. "Endogenous public and private leadership with diverging social and private marginal costs," Manchester School, University of Manchester, vol. 88(5), pages 699-730, September.

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