Public Versus Private Ownership under Costly Taxation
The importance of ownership structure is analyzed in a simple voting framework. The model contains a market failure arising from the market not internalizing the total surplus from trade and a political failure arising from the government catering to the interests of the median voter. In a publicly owned firm the government uses both taxes and the firm´s internal resources government does not control the firm´s internal resources so any non profit generating activities must be purely tax financed. Ownership matters since the gorvernment does not trigger the same resource allocation in a private firm through regulation as in a similar publicly owned firm.
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|Date of creation:||Sep 1998|
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