1.Department of International Business,National Kaohsiung University of Applied Science,Kaohsiung,Taiwan, ROC;2.Wenlan School of Business,Zhongnan University of Economics and Law,Wuhan,China
Abstract:
We examine in a mixed oligopoly setting how foreign competition and the excess burden of taxation will affect privatization policy in the presence of strategic tax/subsidy policies. We show that in the presence of excess burden of taxation with foreign competitors, output subsidy coupled with import tariff and partial privatization is adopted to improve the social welfare. However, if the excess burden of taxation is relatively large, the government may switch to use production tax coupled with tariff policy and partial privatization to improve the social welfare.