Privatization, Partial State Ownership, and Competition

Posted: 2 Jun 2003

See all articles by John Bennett

John Bennett

Brunel University London - Economics and Finance; Institute for the Study of Labor (IZA); University of Wales, Swansea - School of Business and Economics; Centre for Economic Policy Research (CEPR)

Abstract

In practice, governments in transition and other economies often retain some shares in privatized firms. For a two-firm differentiated-product oligopoly, we show how partial state ownership affects the firms' subsequent investment and output behavior. Hence, we determine how the optimum retained state ownership share depends on product-market competitiveness and we find the conditions under which it would be preferable to sell the firms to a single owner. Partial state ownership is optimal if the proportionate welfare weight on government revenue is high, but less than unity. As product-market competitiveness rises, investment is first increasing and then decreasing.

JEL Classification: L33, P21

Suggested Citation

Bennett, John, Privatization, Partial State Ownership, and Competition. Journal of Comparative Economics, Vol. 31, No. 1, March 2003. Available at SSRN: https://ssrn.com/abstract=412820

John Bennett (Contact Author)

Brunel University London - Economics and Finance ( email )

Uxbridge UB8 3PH
United Kingdom
+44 1895 816 201 (Phone)
+44 1895 203 384 (Fax)

Institute for the Study of Labor (IZA)

Schaumburg-Lippe-Str. 7 / 9
Bonn, D-53072
Germany

University of Wales, Swansea - School of Business and Economics ( email )

Singleton Park
Swansea, Wales SA2 8PP SA2 8PP
United Kingdom
+44 1792 295 168 (Phone)
+44 1792 295 872 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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