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International Trade and Strategic Privatization

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  • Bárcena Ruiz, Juan Carlos
  • Garzón San Felipe, María Begoña

Abstract

The literature on mixed oligopoly does not consider that there is strategic interaction between governments when they decide whether to privatize their public firms. In order to analyze this quetion we consider two countries; In each country there is one public firm and n private firms. Firms have a constant marginal cost of production and the public firm is less efficient than the private firms. In this framework, we show that when the marginal cost of the public firms takes an intermediate value only one government privatizes its public firm and that government obtains a lower social welfare than the other.

Suggested Citation

  • Bárcena Ruiz, Juan Carlos & Garzón San Felipe, María Begoña, 2001. "International Trade and Strategic Privatization," BILTOKI 2001-07, Universidad del País Vasco - Departamento de Economía Aplicada III (Econometría y Estadística).
  • Handle: RePEc:ehu:biltok:5764
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    References listed on IDEAS

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    1. Megginson, William L & Nash, Robert C & van Randenborgh, Matthias, 1994. "The Financial and Operating Performance of Newly Privatized Firms: An International Empirical Analysis," Journal of Finance, American Finance Association, vol. 49(2), pages 403-452, June.
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    7. Pal, Debashis, 1998. "Endogenous timing in a mixed oligopoly," Economics Letters, Elsevier, vol. 61(2), pages 181-185, November.
    8. de Fraja, Giovanni & Delbono, Flavio, 1989. "Alternative Strategies of a Public Enterprise in Oligopoly," Oxford Economic Papers, Oxford University Press, vol. 41(2), pages 302-311, April.
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    Cited by:

    1. Junichi Haraguchi & Toshihiro Matsumura, 2020. "Implicit protectionism via state enterprises and technology transfer from foreign enterprises," Review of International Economics, Wiley Blackwell, vol. 28(3), pages 723-743, August.
    2. Haraguchi, Junichi & Matsumura, Toshihiro, 2021. "Market Concentration, Privatization Policies, and Heterogeneity among Private Firms in Mixed Oligopolies," MPRA Paper 106975, University Library of Munich, Germany.
    3. 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.
    4. Susumu Sato & Toshihiro Matsumura, 2019. "Dynamic Privatization Policy," Manchester School, University of Manchester, vol. 87(1), pages 37-59, January.
    5. Artz, Benjamin & Heywood, John S. & McGinty, Matthew, 2009. "The merger paradox in a mixed oligopoly," Research in Economics, Elsevier, vol. 63(1), pages 1-10, March.
    6. Chang, Winston W. & Ryu, Han Eol, 2016. "Export rivalry, vertically-related markets, and optimal public ownership policy," Economic Modelling, Elsevier, vol. 54(C), pages 392-401.
    7. Wang, Leonard F.S. & Chen, Tai-Liang, 2011. "Mixed oligopoly, optimal privatization, and foreign penetration," Economic Modelling, Elsevier, vol. 28(4), pages 1465-1470, July.
    8. Junichi Haraguchi & Toshihiro Matsumura, 2020. "Endogenous public and private leadership with diverging social and private marginal costs," Manchester School, University of Manchester, vol. 88(5), pages 699-730, September.
    9. Heywood, John S. & McGinty, Matthew, 2011. "Cross-border mergers in a mixed oligopoly," Economic Modelling, Elsevier, vol. 28(1), pages 382-389.
    10. Haraguchi, Junichi & Matsumura, Toshihiro, 2018. "Multiple Long-Run Equilibria in a Free-Entry Mixed Oligopoly," MPRA Paper 86704, University Library of Munich, Germany.
    11. Brcena-Ruiz, Juan Carlos & Garzn, Mara Begoa, 2009. "Relocation and public ownership of firms," Journal of the Japanese and International Economies, Elsevier, vol. 23(1), pages 71-85, March.
    12. Haraguchi, Junichi & Matsumura, Toshihiro, 2020. "Common Ownership among Private Firms and Privatization Policies," MPRA Paper 102152, University Library of Munich, Germany.
    13. Bárcena-Ruiz, Juan Carlos, 2012. "Privatization when the public firm is as efficient as private firms," Economic Modelling, Elsevier, vol. 29(4), pages 1019-1023.
    14. Inoue, Tomohiro & Kamijo, Yoshio & Tomaru, Yoshihiro, 2009. "Interregional mixed duopoly," Regional Science and Urban Economics, Elsevier, vol. 39(2), pages 233-242, March.
    15. Sato, Susumu & Matsumura, Toshihiro, 2019. "Shadow cost of public funds and privatization policies," The North American Journal of Economics and Finance, Elsevier, vol. 50(C).
    16. Cato, Susumu & Matsumura, Toshihiro, 2017. "Optimal Production Tax and Privatization Policies under an Endogenous Market Structure," MPRA Paper 82893, University Library of Munich, Germany.
    17. 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.
    18. Junichi Haraguchi & Toshihiro Matsumura, 2020. "Optimal privatization policy with asymmetry among private firms," Bulletin of Economic Research, Wiley Blackwell, vol. 72(3), pages 213-224, July.
    19. Haraguchi, Junichi & Matsumura, Toshihiro & Yoshida, Shohei, 2018. "Competitive pressure from neighboring markets and optimal privatization policy," Japan and the World Economy, Elsevier, vol. 46(C), pages 1-8.
    20. Leonard Wang & Tai-Liang Chen, 2010. "Do cost efficiency gap and foreign competitors matter concerning optimal privatization policy at the free entry market?," Journal of Economics, Springer, vol. 100(1), pages 33-49, May.
    21. Wang F.S., Leonard & Chen, Tai-Liang, 2011. "Privatization, Efficiency Gap, and Subsidization with Excess Taxation Burden," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 52(1), pages 55-68, June.
    22. Arghya Ghosh & Manipushpak Mitra & Bibhas Saha, 2015. "Privatization, Underpricing, and Welfare in the Presence of Foreign Competition," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 17(3), pages 433-460, June.
    23. Junichi Haraguchi & Toshihiro Matsumura, 2021. "Profit‐enhancing entries in mixed oligopolies," Southern Economic Journal, John Wiley & Sons, vol. 88(1), pages 33-55, July.
    24. Dong, Quan & Bárcena-Ruiz, Juan Carlos, 2014. "Corruption and decisions on opening up markets," Economic Modelling, Elsevier, vol. 36(C), pages 23-29.

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    More about this item

    Keywords

    international trade; public firms; privatization;
    All these keywords.

    JEL classification:

    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy

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