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Optimal Production Tax and Privatization Policies under an Endogenous Market Structure

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  • Cato, Susumu
  • Matsumura, Toshihiro

Abstract

We investigate the optimal tax and privatization policies in a mixed oligopoly in which a state-owned public firm competes against private firms in a free-entry market. First, we investigate the domestic private firm case. The optimal tax rate is strictly positive except for the full privatization and full nationalization cases, and the relationship between the optimal tax rate and degree of privatization is inverted U-shaped. Further, the optimal degree of privatization is decreasing in the tax rate. Next, we investigate the foreign private firm case and find that the two policies are mutually independent.

Suggested Citation

  • Cato, Susumu & Matsumura, Toshihiro, 2017. "Optimal Production Tax and Privatization Policies under an Endogenous Market Structure," MPRA Paper 82893, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:82893
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    References listed on IDEAS

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    Cited by:

    1. Juan Carlos Bárcena-Ruiz & F. Javier Casado-Izaga, 2020. "Partial ownership of local firms and zoning of neighboring towns," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 65(1), pages 27-43, August.
    2. Chen, Jiaqi & Lee, Sang-ho & Muminov, Timur K., 2019. "Time-inconsistent Output Subsidy/Tax Policies in Free-entry Mixed Markets," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 60(1), pages 61-77, June.

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    More about this item

    Keywords

    industrial policy; privatization; free entry; unit tax-subsidy; foreign ownership;
    All these keywords.

    JEL classification:

    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
    • H44 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Goods: Mixed Markets
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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