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Dynamic privatization policy

Susumu Sato and Toshihiro Matsumura ()

MPRA Paper from University Library of Munich, Germany

Abstract: This study formulates a two-period model in which the government privatizes a state-owned public firm over multiple periods. We introduce the shadow cost of public funding (i.e., the excess burden of taxation). The government is concerned about both the total surplus and the revenue obtained from the privatization of the public firm. We find that the government may or may not increase the degree of privatization over time depending on the competitiveness of the product market and nationality of private competitors. The government increases the degree of privatization over time if the product market is competitive and the foreign ownership share in private firms is low. Although it adjusts its privatization policy over time, this harms welfare. In addition, this distortion in the ex-post incentive leads to too low a degree of privatization in the first period.

Keywords: timing of privatization, commitment, state-owned public enterprise; foreign competition (search for similar items in EconPapers)
JEL-codes: H42 L33 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mic
Date: 2017-06-23
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Journal Article: Dynamic Privatization Policy (2019) Downloads
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