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Privatization in the presence of foreign competition and strategic policies

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  • Bouwe Dijkstra
  • Anuj Mathew
  • Arijit Mukherjee

Abstract

Recent evidence shows that developing and transition economies are increasingly privatizing their public firms and also experiencing rapid growth of inward foreign direct investment (FDI). In an international mixed oligopoly with strategic tax/subsidy policies, we analyze the interaction between privatization and FDI. We find that the incentive for FDI increases with privatization. However, the possibility of FDI reduces the degree of privatization. Our paper shows that FDI policies reducing the fixed-cost of undertaking FDI may need to complement the privatization policies to attract FDI and to improve domestic welfare. Copyright Springer-Verlag Wien 2015

Suggested Citation

  • Bouwe Dijkstra & Anuj Mathew & Arijit Mukherjee, 2015. "Privatization in the presence of foreign competition and strategic policies," Journal of Economics, Springer, vol. 114(3), pages 271-290, April.
    • Handle: RePEc:kap:jeczfn:v:114:y:2015:i:3:p:271-290
    DOI: 10.1007/s00712-014-0407-3
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    Cited by:

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    3. Akio Kawasaki & Takao Ohkawa & Makoto Okamura, 2022. "Optimal partial privatization in an endogenous timing game: a mixed oligopoly approach," Journal of Economics, Springer, vol. 136(3), pages 227-250, August.

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    More about this item

    Keywords

    Privatization; Product tax/subsidy; Foreign direct investment; Trade; Privatization; F12; F18; F21; L33;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F18 - International Economics - - Trade - - - Trade and Environment
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out

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