Privatization in the presence of foreign competition and strategic policies

Dijkstra, Bouwe; Mathew, Anuj; Mukherjee, Arijit

Abstract

Recent evidence shows that developing and transition economies are increasingly privatizing their public firms and also experiencing rapid growth of inward foreign direct investment (FDI). In an international mixed oligopoly with strategic tax/subsidy policies, we analyze the interaction between privatization and FDI. We find that the incentive for FDI increases with privatization. However, the possibility of FDI reduces the degree of privatization. Our paper shows that FDI policies reducing the fixed-cost of undertaking FDI may need to complement the privatization policies to attract FDI and to improve domestic welfare.

Citation

Dijkstra, B., Mathew, A., & Mukherjee, A. (2014). Privatization in the presence of foreign competition and strategic policies. Journal of Economics, 114(3), https://doi.org/10.1007/s00712-014-0407-3

• Journal Article Type: Article
• Publication Date: Jun 19, 2014
• Deposit Date: Jan 22, 2016
• Publicly Available Date: Jan 22, 2016
• Journal: Journal of Economics
• Print ISSN: 0976-5239
• Electronic ISSN: 1617-7134
• Publisher: Kamla-Raj Enterprises
• Peer Reviewed: Peer Reviewed
• Volume: 114
• Issue: 3
• DOI: https://doi.org/10.1007/s00712-014-0407-3
• Public URL: https://nottingham-repository.worktribe.com/output/730387
• Publisher URL: http://link.springer.com/article/10.1007/s00712-014-0407-3