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Foreign ownership, privatization and subsidization with shadow cost of public funds

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  • Chen, Ding
  • Wang, Leonard F.S.
  • Lee, Jen-yao

Abstract

We examine how the shadow cost of public funds will affect the privatization policy in the presence of strategic tax/subsidy policies in a mixed oligopoly model with foreign ownership. We show that (1) When the dual policies are employed, the privatization policy is partial privatization and the production tax may be used if the shadow of the public fund is relatively large; (2) When the privatization policy is employed, the degree of privatization is decreasing in the shadow cost of public funds if the share of foreign investors in the private firms is relative small; however, when the dual policies are employed, the degree of privatization is increasing in the shadow cost of public funds. Additionally, we show that the influence of foreign ownership on the privatization and subsidization policies are dependent upon the cost structures, ownership types, distribution of firms, and policy pairs.

Suggested Citation

  • Chen, Ding & Wang, Leonard F.S. & Lee, Jen-yao, 2019. "Foreign ownership, privatization and subsidization with shadow cost of public funds," The North American Journal of Economics and Finance, Elsevier, vol. 50(C).
    • Handle: RePEc:eee:ecofin:v:50:y:2019:i:c:s1062940818303280
    DOI: 10.1016/j.najef.2018.10.017
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    Cited by:

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    2. Hamid Beladi & May Hu & Tan (Charlene) Lee, 2022. "International joint ventures, technology licensing and ownership structure," International Journal of Economic Theory, The International Society for Economic Theory, vol. 18(4), pages 423-439, December.
    3. Xu, Lili & Zhao, Qinghong & Chen, Yuyan & Lee, Sang-Ho, 2023. "Post privatization of high-speed rail with corporate social responsibility (CSR) in an international transportation market: Mandatory CSR versus voluntary CSR," Economics of Transportation, Elsevier, vol. 35(C).
    4. Lee, Chien-Hui & Lee, Jen-Yao & Wang, Leonard F.S., 2021. "Foreign Ownership and Optimal Discriminatory Tariffs under Oligopolistic Competition," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 74(1), pages 97-114.
    5. Leonard F. S. Wang & Arijit Mukherjee & Chenhang Zeng, 2020. "Does technology licensing matter for privatization?," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 22(5), pages 1462-1480, September.
    6. Xia Wang & Tingting Tan & Mingqing Xing, 2022. "Environmental awareness of the private firm and optimal privatization in a mixed duopoly," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(8), pages 4055-4063, December.

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    More about this item

    Keywords

    Foreign ownership; Privatization; The shadow of the public fund; Production subsidy; Social welfare;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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