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Privatization of state holding corporations


  • Juan Carlos Bárcena-Ruiz

    () (Universidad del País Vasco UPV/EHU)

  • María Begoña Garzón

    () (Universidad del País Vasco UPV/EHU)


Abstract Many countries have privatized part of their state holding corporations in recent years. However, the literature on this issue has analyzed mainly the privatization of uniproduct public firms. We consider a state holding corporation with two plants that may produce complement or substitute goods. Assuming that private firms are more efficient than the state holding corporation we find the following: If the marginal cost of the state corporation is low, it is not privatized either if goods are substitutes or if they are complements. However, if the marginal cost of the state corporation is high the two plants of the state holding corporation are sold to a single private investor if goods are complements, and to different investors if goods are substitutes. If goods are close substitutes and the marginal cost of the state corporation takes an intermediate value only one plant is privatized. We extend the model to consider that firms are equally efficient, that they face quadratic cost functions and that there are n uniplant private firms producing each good. We find two differences with the previous result: The government never privatizes just one plant of the state corporation, and when goods are complements the two plants of the state corporation are sold to different investors if n is high.

Suggested Citation

  • Juan Carlos Bárcena-Ruiz & María Begoña Garzón, 2017. "Privatization of state holding corporations," Journal of Economics, Springer, vol. 120(2), pages 171-188, March.
  • Handle: RePEc:kap:jeczfn:v:120:y:2017:i:2:d:10.1007_s00712-016-0498-0
    DOI: 10.1007/s00712-016-0498-0

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    References listed on IDEAS

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    Cited by:

    1. Haraguchi, Junichi & Matsumura, Toshihiro, 2018. "Implicit Protectionism via State Enterprises and Technology Transfer from Foreign Enterprises," MPRA Paper 88564, University Library of Munich, Germany.
    2. Liu, Yi & Matsumura, Toshihiro & Zeng, Chenhang, 2018. "The Relationship between Privatization and Corporate Taxation Policies," MPRA Paper 89784, University Library of Munich, Germany, revised Oct 2018.

    More about this item


    Privatization; State holding corporation; Multiproduct firms; Oligopoly;

    JEL classification:

    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out


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