 Shadow cost of public funds and privatization policiesSusumu Sato and Toshihiro Matsumura The North American Journal of Economics and Finance, 2019, vol. 50, issue C Abstract: We investigate the impacts of government budget constraints on the optimal privatization policy in mixed oligopolies by introducing the shadow cost of public funds. The government is concerned with both the total social surplus and the revenue obtained by privatization. We find that the relationship between the shadow cost of public funds and the optimal privatization policy is non-monotone. When the cost is moderate, the higher the cost, the lower the optimal degree of privatization. However, when the cost is high, a cost increase may drastically increase the optimal degree of privatization. The average foreign ownership share in private enterprises affects the optimal degree of privatization, whereas the distribution of foreign ownership share among private firms does not. Foreign ownership shares in privatized public enterprises also influence the optimal degree of privatization, and a non-monotone relationship emerges for the smaller shadow cost of public funds when the share is larger. Keywords: Shadow cost of public funds; Free entry; State-owned public enterprises; Foreign competition (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:50:y:2019:i:c:s1062940818306685 DOI: 10.1016/j.najef.2019.101026 Access Statistics for this article The North American Journal of Economics and Finance is currently edited by Hamid Beladi More articles in The North American Journal of Economics and Finance from Elsevier |
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