1,741 research outputs found

    Privatisation, strategic foreign direct investment and the host country welfare

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    Recent evidence shows that developing countries and transition economies are increasingly privatising their public firms and at the same time experiencing rapid growth of inward foreign direct investment (FDI). In an international mixed oligopoly, we analyse the interaction between privatisation and FDI. We show that privatisation increases the incentive for FDI, which in turn, increases the incentive for privatisation compared to the situation of no FDI. The optimal degree of privatisation depends on the cost difference between the public and the foreign firms, and on the foreign firm's mode of entry. We show that our results are robust with respect to the incentive contracts between the owners and the managers. The incentive for FDI and is higher under the incentive contract than under the no incentive contract, and the optimal degree of privatisation is almost always higher under the incentive contract than under the no incentive contract.Privatisation; FDI; Welfare; Incentive contract

    Privatisation and Public Ownership in Finland

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    Finland’s state-enterprise sector has been larger than in most countries and included several manufacturing companies. These were usually established because of a scarcity of private venture capital, with a mission to contribute to industrialisation. Some companies have now been privatised in a process that has been fairly successful in its stated aims of generating revenues and achieving industrial restructuring. But the state-owned companies have also been fairly successful, so there is no evidence of improved financial performance or cost efficiency despite stronger focus on profits. Costs have on the other hand often been reduced in traditional public-sector industries, where private provision has increased with deregulation and/or competitive tendering and more commercial objectives. The consequences for allocative efficiency are however ambiguous, because of changes in quality and working conditions.privatisation, public ownership, Finland

    Mixed duopoly, privatization and the shadow costs of public funds : exogenous and endogenous timing

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    The purpose of this article is to investigate how the introduction of the shadow cost of public funds in the utilitarian measure of the economy wide welfare affects the behavior of a welfare maximizer public firm in amixed duopoly. We prove that when firms play simultaneously, the mixed-Nash equilibrium can dominate any Cournot equilibria implemented after a privatization, with or without efficiency gains. This can be true both interms of welfare and of public firm's profit. When we consider endogenous timing, we show that either mixed-Nash, private leadership or both Stackelberg equilibria can result as subgameperfect Nash equilibria (SPNE). As a consequence, the sustainability of sequential equilibria enlarges the subspace of parameters such that themarket performance with an inefficient public firm is better than the one implemented after a full-efficient privatization. Absent efficiency gains, privatization always lowers welfare

    Privatisation policy with different oligopolistic competition in the public utilities market

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    This study constructs an oligopoly model in public utilities sector to explore the optimal privatisation policy and the factors affecting equilibrium outcomes and explores the optimal proportion of state-owned shares. We also offer empirical evidence of China’s public utilities from 1985 to 2019 to prove the applicability of model results. The results show that, depending on product differentiation, cost variance, technical level, nationalisation, partial or full privatisation can be optimal. Improving capital efficiency increases social welfare in Model PP, but not in Model PS. Product differentiation improves social welfare at the expense of profits in SS model. In Model PM, technical improvements boost private enterprise profits but induce a decrement in social welfare. A high proportion of state-owned shares fail to improve social welfare in Model SM. In a word, the value range of parameters and competition modes in public utilities sector affect market players’ welfare distribution, which identifies with the empirical analysis of China’s public utilities development

    Reform of the Coal Sector in an Open Economy: The Case of China

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    Cheap, abundant and easy to transport and store, coal has been produced and consumed to meet people's energy needs. The last decade's growth in global coal use has been driven mainly by developing economies like China, whose phenomenal economic growth has been powered by coal-fired electricity and promoted by the export of manufactured goods. A recent reform focus in China's coal sector is on coal taxation. The paper develops a game-theoretic model tailored to the context of China where coal taxation reform takes place against the background of privatisation of coal firms and an open economy. It finds that the adoption of special coal taxes is optimal for social welfare under most circumstances, but may induce coal firms to commit opportunistic behaviour in the process of privatisation. The paper also cautions about potential resistance to the reform from consumers, coal firms and government officials

    A Fair Price for Energy? Ownership versus Market Opening in the EU15

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    In the past two decades privatisation and liberalisation of network industries providing services of general economic interest (SGEI), have been particularly significant in the European Union. Wide variations around a common policy trend can, however, be observed across countries and sectors. We focus on electricity and gas sectors because energy sectors have usually been profit makers, not affected by direct government transfers, in contrast to other SGEI. We study the effects of privatisation and other reforms on consumer prices using both subjective data on consumers’ perception of utility prices and data on average prices paid.privatisation, electricity, gas, reforms

    Privatization and Restructuring in Concentrated Markets

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    This paper examines the restructuring of state assets in markets deregulated by privatizations and investment liberalizations. We show that the government has a stronger incentive to restructure than the buyer: A firm restructuring only takes into account how much its own profit will increase. The government internalizes that restructuring increases the sales price not only from the increase in the acquirer’s profit, but also from a reduced profit for the non-acquirer, whose profits decrease due to its rival’s restructuring. We also identify situations where a slow sale can significantly reduce the sales price because of strategic investment and product market effects.Privatization, Asset ownership, Restructuring
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