THE THEORY OF STATE-OWNED ENTERPRISES IN MARKET ECONOMIES

Abstract. Four topics are covered: the circumstances under which state-owned enterprises (SOEs) are more effective than private firms; the different approaches to modelling public and private firms; the performance of SOEs; and strategies including privatization to limit their more damaging effects. It is argued that ideological or development motives are important in their genesis, but that if efficiency and innovation are key considerations the normative case for their existence is more doubtful. Various types of SOE model are identified, deriving from the variety of circumstances in which they operate, and the theoretical perspective of the modeller. These include the property rights school, the public choice tradition, neoclassical, behavioural and budget maximizing approaches. All models assume the existence of monitoring problems, created by informational asymmetry. The consequences can include high non-pecuniary benefits for managers, a concentration on monitored activities, and lower innovation levels and efficiency than private firms. Curiously this is not necessarily reflected in higher prices or costs. Possible remedial strategies include a change of ownership, a change of objectives, the introduction of incentive-compatible payment schemes, improved performance indicators and privatization.     

Partial privatization in mixed duopoly with price and quality competition

We analyze price and quality competition in a mixed duopoly in which a profit-maximizing private firm competes against a state-owned public firm. We first show that the welfare-maximizing public firm provides a lower quality product than the private firm when they are equally efficient. In order to maximize social welfare, government manipulates the objective of the public firm that is given by a convex combination of profits and social welfare. It is demonstrated that an optimal incentive of the public firm is welfare maximization under the absence of quality competition, but it is neither welfare maximization nor profit maximization under the presence of quality competition. The result supports a completely mixed objective between welfare and profit maximizations or partial privatization of the public firm.      

中国民营化:“西学东渐”后的一种新范式

兴起于20世纪80年代的西方民营化改革已经成为席卷全球的浪潮,无论是资本主义国家还是社会主义国家都积极投身于民营化的实践之中,"可以说,民营化已超越党派偏好或意识形态,成为了一种务实的得到广泛应用的治理方式和公共服务模式",并分别形成了以英、美、奥为首的三种典范,且日益深刻影响到中国公共事业改革。但由于制度和文化背景的巨大差异,师从西方的中国民营化改革还没有显著的实践效果,因此,我们在学习和借鉴西方民营化经验和教训的同时,我们必须对自身固有的模式进行理性的探讨,辩证地看待民营化之于中国公共事业改革意义。     

Reforming Social Insurance in The Netherlands

This paper discusses recent reforms of social insurance in the Netherlands. It describes how a serious economic crisis in the beginning of the 1980s set the stage for the subsequent reform process. The most fundamental reforms were introduced in the areas of sickness insurance, which was privatized, and disability insurance, which now involves experience rating. After exploring various challenges affecting the future of social protection, the paper discusses various remaining policy options.     

Double Marginalization and Privatization in Liquor Retailing

The purpose of this paper is to examine the price andstore count predictions of the spatial and non-spatialmodels of vertical integration between an upstreammonopolist and a downstream monopolisticallycompetitive retail industry using data from Alberta'srecently privatized liquor retailing industry. Thisindustry, which had been a government owned monopoly,became monopolistically competitive underprivatization. The models predict that verticaldisintegration will lead to higher retail prices andan increase in the store count in markets that cansupport multiple stores. Both predictions aresupported by liquor store count and price data.