Journal of Economics

, 98:203 | Cite as

Privatization and entries of foreign enterprises in a differentiated industry

  • Toshihiro Matsumura
  • Noriaki MatsushimaEmail author
  • Ikuo Ishibashi


We investigate whether or not privatization is beneficial from the viewpoint of social welfare in a monopolistic competition model. We discuss the relationship between the welfare effects of privatization and the degree of foreign direct investment in the private sector, which is an important problem in developing countries and in transition economies such as China and Central and Eastern European countries. We find that, in the long run, privatization of a public firm is more likely to improve welfare when the country depends on foreign capital in the private sector, whereas the opposite tendency exists in the short run.


Mixed oligopoly Privatization Product differentiation Foreign firms Free entry 

JEL Classification

L13 H42 


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Copyright information

© Springer-Verlag 2009

Authors and Affiliations

  • Toshihiro Matsumura
    • 1
  • Noriaki Matsushima
    • 2
    Email author
  • Ikuo Ishibashi
    • 3
  1. 1.Institute of Social ScienceUniversity of TokyoBunkyo-ku, TokyoJapan
  2. 2.Institute of Social and Economic ResearchOsaka UniversityIbaraki, OsakaJapan
  3. 3.Osaka School of International Public PolicyOsaka UniversityToyonaka, OsakaJapan

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