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SOE Reform under Oligopolistic Market Structure: The Optimal Choice of State Shares

SOE Reform under Oligopolistic Market Structure: The Optimal Choice of State Shares This paper examines the effect of the change of state shares in a state-owned enterprise (SOE) on the efficiency of the whole society and the payoff of the government. This issue is addressed by setting up a mixed oligopolistic competition model and dividing the analysis into two cases: closed economy and open economy. The basic results are as follows: If the relative production efficiency of an SOE is too low, complete state ownership is not optimal, and privatization will be a necessary step; however, if the relative production efficiency of an SOE is not too low, complete privatization is not optimal both for the government and from the perspective of social welfare. The results can, to a certain extent, provide theoretical support to the government’s idea on the SOE reform. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Frontiers of Economics in China Brill

SOE Reform under Oligopolistic Market Structure: The Optimal Choice of State Shares

Frontiers of Economics in China , Volume 1 (1): 39 – Jan 1, 2006

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Publisher
Brill
Copyright
Copyright 2006 by Koninklijke Brill NV, Leiden, The Netherlands
ISSN
1673-3444
eISSN
1673-3568
DOI
10.1007/s11459-005-0007-9
Publisher site
See Article on Publisher Site

Abstract

This paper examines the effect of the change of state shares in a state-owned enterprise (SOE) on the efficiency of the whole society and the payoff of the government. This issue is addressed by setting up a mixed oligopolistic competition model and dividing the analysis into two cases: closed economy and open economy. The basic results are as follows: If the relative production efficiency of an SOE is too low, complete state ownership is not optimal, and privatization will be a necessary step; however, if the relative production efficiency of an SOE is not too low, complete privatization is not optimal both for the government and from the perspective of social welfare. The results can, to a certain extent, provide theoretical support to the government’s idea on the SOE reform.

Journal

Frontiers of Economics in ChinaBrill

Published: Jan 1, 2006

Keywords: state shares; transition economy; employment burden; mixed oligopoly; WTO entry and foreign competition

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