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Privatization and entries of foreign enterprises in a differentiated industry

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  • Toshihiro Matsumura
  • Noriaki Matsushima
  • Ikuo Ishibashi

Abstract

We investigate whether or not privatization is beneficial from the viewpoint of social welfare in a monopolistic competition model. We discuss the relationship between the welfare effects of privatization and the degree of foreign direct investment in the private sector, which is an important problem in developing countries and in transition economies such as China and Central and Eastern European countries. We find that, in the long run, privatization of a public firm is more likely to improve welfare when the country depends on foreign capital in the private sector, whereas the opposite tendency exists in the short run.
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Suggested Citation

  • Toshihiro Matsumura & Noriaki Matsushima & Ikuo Ishibashi, 2009. "Privatization and entries of foreign enterprises in a differentiated industry," Journal of Economics, Springer, vol. 98(3), pages 203-219, December.
  • Handle: RePEc:kap:jeczfn:v:98:y:2009:i:3:p:203-219
    DOI: 10.1007/s00712-009-0091-x
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    More about this item

    Keywords

    Mixed oligopoly; Privatization; Product differentiation; Foreign firms; Free entry; L13; H42;
    All these keywords.

    JEL classification:

    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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