PRIVATIZATION IN A SMALL OPEN ECONOMY WITH IMPERFECT COMPETITION

Partha Sen and Arghya Ghosh
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Partha Sen: Department of Economics, Delhi School of Economics, Delhi, India

No 195, Working papers from Centre for Development Economics, Delhi School of Economics

Abstract: We look at privatization in a general equilibrium model of a small, tariff-distorted, open economy. There is a differentiated good produced by both private and public sector enterprises. A reduction in government production in order to cut losses from such production raises the returns to capital and increases the tariff revenue, which are welfare improving. However, privatization also leads to lower wages and possibly fewer private brands. This lowers workers’ welfare, which may make privatization politically infeasible. Privatization can improve workers’ welfare with complementary reforms, e.g., attracting foreign investment or trade liberalization.

Keywords: public sector enterprise; privatization; foreign investment; trade liberalization; monopolistic competition. (search for similar items in EconPapers)
JEL-codes: F12 H41 L32 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2010-12
New Economics Papers: this item is included in nep-cis
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Related works:
Journal Article: Privatization in a Small Open Economy with Imperfect Competition (2012)
Working Paper: Privatization in a Small Open Economy with Imperfect Competition (2008)
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