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Partial Privatization, Foreign Competition, and Optimum Tariff

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  • Chi-Chur Chao
  • Eden S. H. Yu

Abstract

Using a simple international mixed oligopoly model with one public and one or more foreign firms, this paper examines the effect of partial privatization or foreign competition on optimum tariffs and finds that foreign competition lowers the optimal tariff rate but partial privatization raises it. This result implies that trade liberalization is welfare improving if a country opens up its economy by allowing foreign competition. However, the liberalization policy is not desirable when the country only partially or completely privatizes its publicly-owned enterprises. Copyright © 2006 The Authors; Journal compilation © Blackwell Publishing Ltd. 2006.

Suggested Citation

  • Chi-Chur Chao & Eden S. H. Yu, 2006. "Partial Privatization, Foreign Competition, and Optimum Tariff," Review of International Economics, Wiley Blackwell, vol. 14(1), pages 87-92, February.
  • Handle: RePEc:bla:reviec:v:14:y:2006:i:1:p:87-92
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