Optimal Privatization and Economic Growth in a Schumpeterian Economy

Po-yang Yu and Ching-chong Lai

Journal of Macroeconomics, 2020, vol. 64, issue C

Abstract: This paper analyzes the growth and welfare effects of the privatization of public firms in a Schumpeterian growth model. Two alternative definitions of privatization are proposed in our model. The first is the ratio of mixed R&D firms’ equity shares owned by the household, which is dubbed vertical privatization. The second is the number of unmixed R&D firms, which is called horizontal privatization. We find that, under both definitions, privatization is beneficial to economic growth while the effect of privatization on social welfare is ambiguous. Accordingly, our analysis reveals that a partial privatization could be an optimal policy. Moreover, we also discuss how the extent of patent protection is related to optimal privatization.

Keywords: Privatization; Economic growth; R&D; Intellectual property rights (search for similar items in EconPapers)
JEL-codes: L33 O31 O34 O40 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:64:y:2020:i:c:s0164070419303970

DOI: 10.1016/j.jmacro.2020.103205

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