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Long-Run Effects of Foreign Penetration on Privatization Policies

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  • Susumu Cato
  • Toshihiro Matsumura

Abstract

This paper investigates the long-run effect of foreign penetration in product markets on privatization policies. We find that the optimal degree of privatization is increasing in foreign penetration. This result is in sharp contrast to the existing short-run result that it is decreasing. Our result suggests that from a long-run viewpoint, the country with a more open market should promote the privatization of public enterprises, even though this reduces welfare in the short run.

Suggested Citation

  • Susumu Cato & Toshihiro Matsumura, 2012. "Long-Run Effects of Foreign Penetration on Privatization Policies," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 168(3), pages 444-454, September.
    • Handle: RePEc:mhr:jinste:urn:sici:0932-4569(201209)168:3_444:leofpo_2.0.tx_2-7
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    References listed on IDEAS

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    1. Anderson, Simon P. & de Palma, Andre & Thisse, Jacques-Francois, 1997. "Privatization and efficiency in a differentiated industry," European Economic Review, Elsevier, vol. 41(9), pages 1635-1654, December.
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    More about this item

    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

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