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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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    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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    3. Ming Lin & Toshihiro Matsumura, 2012. "Presence of foreign investors in privatized firms and privatization policy," Journal of Economics, Springer, vol. 107(1), pages 71-80, September.
    4. Giacomo Corneo & Oliver Jeanne, 1994. "Oligopole mixte dans un marché commun," Annals of Economics and Statistics, GENES, issue 33, pages 73-90.
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    6. 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.
    7. 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.
    8. Kenneth Fjell & Debashis Pal, 1996. "A Mixed Oligopoly in the Presence of Foreign Private Firms," Canadian Journal of Economics, Canadian Economics Association, vol. 29(3), pages 737-743, August.
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    13. Susumu Cato & Toshihiro Matsumura, 2015. "Optimal Privatisation and Trade Policies with Endogenous Market Structure," The Economic Record, The Economic Society of Australia, vol. 91(294), pages 309-323, September.
    14. Kenji Fujiwara, 2007. "Partial Privatization in a Differentiated Mixed Oligopoly," Journal of Economics, Springer, vol. 92(1), pages 51-65, September.
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    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    industrial policy; privatization; free entry; unit tax-subsidy; foreign ownership;

    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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