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The feasibility of privatization and foreign penetration

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  • Wang, Leonard F.S.
  • Tomaru, Yoshihiro

Abstract

Partial privatization is implementable only if private investors have incentives to purchase the shares of public firms. With this obvious fact in mind, we reconsider the effect of foreign penetration on privatization policy. We show that partial privatization is optimal for small extent of foreign penetration and the optimal degree of privatization is not monotonically related to foreign penetration. This result is in sharp contrast to the existing works which suggest either the positive or negative relationship. Furthermore, using a linear demand model, we find that the optimal policy can be full nationalization once the extent of foreign penetration is large.

Suggested Citation

  • Wang, Leonard F.S. & Tomaru, Yoshihiro, 2015. "The feasibility of privatization and foreign penetration," International Review of Economics & Finance, Elsevier, vol. 39(C), pages 36-46.
    • Handle: RePEc:eee:reveco:v:39:y:2015:i:c:p:36-46
    DOI: 10.1016/j.iref.2015.06.001
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Akio Kawasaki, 2021. "Optimal number of privatised products in a differentiated mixed oligopoly with free market entry," Australian Economic Papers, Wiley Blackwell, vol. 60(4), pages 651-663, December.
    2. Haraguchi, Junichi & Matsumura, Toshihiro, 2018. "Government-leading welfare-improving collusion," International Review of Economics & Finance, Elsevier, vol. 56(C), pages 363-370.
    3. Kosuke Hirose & Toshihiro Matsumura, 2019. "Comparing welfare and profit in quantity and price competition within Stackelberg mixed duopolies," Journal of Economics, Springer, vol. 126(1), pages 75-93, January.
    4. Akio Kawasaki, 2023. "Pricing Strategies and Partial Privatization Policy," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 62(3), pages 293-319, May.
    5. 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.
    6. Xu, Lili & Lee, Sang-Ho & Matsumura, Toshihiro, 2017. "Ex-ante versus ex-post privatization policies with foreign penetration in free-entry mixed markets," International Review of Economics & Finance, Elsevier, vol. 50(C), pages 1-7.
    7. Chao, Chi-Chur & Nabin, Munirul & Nguyen, Xuan & Sgro, Pasquale M., 2016. "Wage inequality and welfare in developing countries: Privatization and reforms in the short and long run," International Review of Economics & Finance, Elsevier, vol. 42(C), pages 474-483.
    8. Seung-Leul Kim & Sang-Ho Lee & Toshihiro Matsumura, 2019. "Corporate social responsibility and privatization policy in a mixed oligopoly," Journal of Economics, Springer, vol. 128(1), pages 67-89, September.
    9. 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).
    10. Bárcena-Ruiz, Juan Carlos & Garzón, María Begoña, 2020. "Mergers between local public firms," The North American Journal of Economics and Finance, Elsevier, vol. 51(C).
    11. Liu, Yi & Lahiri, Sajal & Liu, Tianqi, 2018. "Optimal Partial Privatization in the Presence of Foreign Competition: The Role of Efficiency Differentials and Unemployment," MPRA Paper 91471, University Library of Munich, Germany, revised 23 Jan 2019.
    12. Juan Carlos Bárcena-Ruiz & Quan Dong & Leonard F. S. Wang, 2020. "Foreign-owned firms and partial privatization of state holding corporations," The Japanese Economic Review, Springer, vol. 71(2), pages 287-301, April.

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    More about this item

    Keywords

    Partial privatization; International competition; Mixed oligopoly;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out

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