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Optimal Privatization and Economic Growth in a Schumpeterian Economy

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  • Yu, Po-yang
  • Lai, Ching-chong

Abstract

This paper analyzes the growth and welfare effects of the privatization of public firms in a Schumpeterian growth model. Two alternative definitions of privatization are proposed in our model. The first is the ratio of mixed R&D firms’ equity shares owned by the household, which is dubbed vertical privatization. The second is the number of unmixed R&D firms, which is called horizontal privatization. We find that, under both definitions, privatization is beneficial to economic growth while the effect of privatization on social welfare is ambiguous. Accordingly, our analysis reveals that a partial privatization could be an optimal policy. Moreover, we also discuss how the extent of patent protection is related to optimal privatization.

Suggested Citation

  • Yu, Po-yang & Lai, Ching-chong, 2020. "Optimal Privatization and Economic Growth in a Schumpeterian Economy," Journal of Macroeconomics, Elsevier, vol. 64(C).
    • Handle: RePEc:eee:jmacro:v:64:y:2020:i:c:s0164070419303970
    DOI: 10.1016/j.jmacro.2020.103205
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    More about this item

    Keywords

    Privatization; Economic growth; R&D; Intellectual property rights;
    All these keywords.

    JEL classification:

    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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