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Partial Privatization, Foreign Competition, and Optimum Tariff *
Author(s) -
Chao ChiChur,
Yu Eden S. H.
Publication year - 2006
Publication title -
review of international economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.513
H-Index - 58
eISSN - 1467-9396
pISSN - 0965-7576
DOI - 10.1111/j.1467-9396.2006.00562.x
Subject(s) - tariff , economics , oligopoly , competition (biology) , liberalization , international economics , welfare , free trade , partial equilibrium , international trade , general equilibrium theory , microeconomics , market economy , ecology , biology
Using a simple international mixed oligopoly model with one public and one or more foreign firms, this paper examines the effect of partial privatization or foreign competition on optimum tariffs and finds that foreign competition lowers the optimal tariff rate but partial privatization raises it. This result implies that trade liberalization is welfare improving if a country opens up its economy by allowing foreign competition. However, the liberalization policy is not desirable when the country only partially or completely privatizes its publicly‐owned enterprises.