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Optimal Production Tax and Privatization Policies under an Endogenous Market Structure

Sususmu Cato () and Toshihiro Matsumura ()

MPRA Paper from University Library of Munich, Germany

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.

Keywords: industrial policy; privatization; free entry; unit tax-subsidy; foreign ownership (search for similar items in EconPapers)
JEL-codes: H42 H44 L13 (search for similar items in EconPapers)
Date: 2017-12-20
New Economics Papers: this item is included in nep-bec, nep-com, nep-pbe and nep-pub
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