Foreign competition and optimal privatization with excess burden of taxation

Lee, Jen-Yao; Wang, Leonard F.S.

doi:10.1007/s00712-017-0592-y

Cited by 21 publications

(15 citation statements)

References 23 publications

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“…The similar specification can be found in Wang and Chen (), and Matsumura and Tomaru (, ), Wang and Lee (), and Chen et al, (). Note that (1+ λ ) is the so‐called marginal cost of public funding (MCF).…”

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confidence: 82%

Indirect taxation with shadow cost of public funds in mixed oligopoly

2020

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We adopt a mixed oligopoly model, where a state‐owned welfare‐maximizing public firm competes with a profit‐maximizing private firm, to compare the welfare effects of the specific and ad valorem tax in the presence of the shadow cost of public funds. Following the assumption of most previous literature that total output is constant under specific and ad valorem taxation, we find that, when the shadow cost of public funds exists, the tax policy must be adjusted according to the privatization level of the public firm; if the privatization level is low (medium, high), the government needs to adopt ad valorem (specific, ad valorem) tax. Moreover, the private firm will earn a higher (lower) profit under ad valorem tax than under specific tax, if the public firm is not fully privatized and the shadow cost of public funds is high (low).

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confidence: 82%

Indirect taxation with shadow cost of public funds in mixed oligopoly

2020

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“…The objective function of the firm is a weighted average of SW and employee utility.Assumption Assume that the inverse demand function is p = a − q 1 − q 2 , where a is a positive constant, and q i ( i = 1,2) is the output of firm i . This assumption is adopted in many studies (e.g., Jain & Pal, ; Lee & Wang, ). We suppose that the marginal cost depends on the efficiency of the state‐owned capital and employee shareholding as well as the proportion of employee stocks (e.g., Chen, Qi, Cao, & Li, ) .…”

Section: The Modelmentioning

confidence: 99%

“…Chen (2017) shows that if privatization helps increase efficiency, then the degree of privatization should be increased. Lee and Wang () find that the timing of privatization influences the optimal degree of privatization. Dong, Barcenaruiz, and Garzon () show that whether the product is a substitute or a complementary product affects the degree of privatization.…”

Section: Introductionmentioning

confidence: 99%

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Duopoly, mixed ownership, and the optimal proportion of employee stocks in state‐owned enterprises in China

et al. 2019

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We examine the optimal proportion of employee stocks in two kinds of duopoly markets: The first market includes two mixed‐ownership state‐owned enterprises (SOEs), and the second market includes one mixed‐ownership SOE and one private enterprise. We introduce the particularities of employee stock ownership plans in SOEs in China to the subjective function and cost function. We find that partial holding, full holding, or non‐holding can be optimal, and the optimal proportion depends on the types of rival firms, the efficiency gap in different kinds of shares, and employee behavioral tendencies. Moreover, the optimal proportion of employee stocks is subject to external institutional environment.

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“…However, as Matsumura and Tomaru () showed, the privatization neutrality theorem does not hold in the presence of excess burden of taxation. Then, Lee and Wang () investigated the relationship between privatization policy and other industrial policies in a non‐free entry market and showed that partial privatization is optimal. The authors also showed that the optimal subsidy rate could be negative, in contrast to White () and Poyago‐Theotoky ().…”

Section: Introductionmentioning

confidence: 99%

Optimal Production Tax in a Mixed Market with an Endogenous Market Structure

Cato

Matsumura

2019

The Manchester School

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We investigate how the optimal production tax rate is affected by 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 an inverted U‐shape. Next, we investigate the foreign private firm case and find that the non‐monotonic relationship disappears.

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Foreign competition and optimal privatization with excess burden of taxation

Cited by 21 publications

References 23 publications

Indirect taxation with shadow cost of public funds in mixed oligopoly

Indirect taxation with shadow cost of public funds in mixed oligopoly

Duopoly, mixed ownership, and the optimal proportion of employee stocks in state‐owned enterprises in China

Optimal Production Tax in a Mixed Market with an Endogenous Market Structure

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