Optimal subsidies in the competition between private and state-owned enterprises
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AbstractRecent policy discussions have debated whether governments should adopt equal policies towards state-owned and private enterprises. We analyze this issue in a mixed oligopoly setting, in which the government can award different subsidies to these two types of firms. We show that the optimal subsidy policy is equal treatment, regardless of the relative weight on social welfare versus profits by the state-owned enterprise. This result is robust to the form of production, market demand, composition of firm types, and heterogeneity in the objectives of firms. However, heterogeneous cost structures among the firms yield a non-uniform optimal subsidy.
Acceptance Date15/05/2019
All Author(s) ListMingzhi Li, Jaimie W. Lien, Jie Zheng
Journal nameInternational Review of Economics and Finance
LanguagesEnglish-United States
KeywordsState-owned Enterprises, Mixed Oligopoly, Subsidy Policy, Publicization, Privatization

Last updated on 2021-26-09 at 01:07