Privatization Policy in an International Oligopoly

19 Pages Posted: 6 Dec 2005

See all articles by Pehr-Johan Norbäck

Pehr-Johan Norbäck

Research Institute of Industrial Economics (IFN)

Lars Persson

Research Institute of Industrial Economics (IFN); Centre for Economic Policy Research (CEPR)

Abstract

This paper studies privatization policy in an international oligopoly. The argument that equal treatment of foreign investors will be detrimental to domestic welfare by shifting profits from domestic to foreign firms is shown to be less relevant in privatization auctions than for greenfield FDI. This is because such profit shifts are paid for in part by foreign firms in the bidding competition for the privatized firm in the auction. It is also shown that small local equity requirements are likely to be beneficial, but large ones are counterproductive, preventing welfare-enhancing foreign acquisitions.

Suggested Citation

Norbäck, Pehr-Johan and Persson, Lars, Privatization Policy in an International Oligopoly. Economica, Vol. 72, No. 288, pp. 635-653, November 2005, Available at SSRN: https://ssrn.com/abstract=856666 or http://dx.doi.org/10.1111/j.1468-0335.2005.00436.x

Pehr-Johan Norbäck (Contact Author)

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

Lars Persson

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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