Trade policy and public ownership

JEL-Classification: F12, F13.This paper discusses the influence of public ownership on trade policy instruments. We demonstrate three important invariance results. First, the degree of public ownership affects neither the level of socially optimal activities nor welfare if the government chooses optimal trade policy instruments. Second, in the case of rivalry between domestic export firms, the optimal export tax is independent of the degree of public ownership. Third, in the case of rivalry in the home market, the optimal import tariff is independent of the degree of public ownership. In this case, the optimal production subsidy decreases with public ownership if the optimal tariff is positive. For the case of Cournot rivalry in a third market, the optimal export subsidy is an increasing function of the public ownership share, while in the case of Bertrand rivalry with differentiated products, the optimal export tax is an increasing function of that parameter.UnpublishedChang, W.W., 2005, "Optimal Trade and Privatization Policies in an International Duopoly with Cost Asymmetry", Journal of International Trade and Economic Development, 14, 19-42. Brander, J.A. and B. Spencer, 1981,"Tariffs and the Extraction of Foreign Monopoly Rents under Potential Entry,' Canadian Journal of Economics, 14, 371-389. Brander, J.A. and B. Spencer, 1984, "Trade Warfare: Tariffs and Cartels," Journal of International Economics 16, 227-242. Brander, J.A. and B. Spencer, 1985, Export Subsidies and International Market Share Rivalry, Journal of International Economics, 18, 83-101. Brander, J.A., 1995, "Strategic Trade Policy," in Handbook of International Economics, Volume 3. (eds: Gene Grossman and Kenneth Rogoff), North Holland, Amsterdam. Bulow, J., J. Geanakoplos and P. Klemperer, 1985, "Multimarket oligopoly: Strategic substitutes and complements ", Journal of Political Economy, 93, 488-511. Conway, P., V. Janod and G. Nicoletti, 2005, "Product Market Regulation in OECD Countries: 1998 to 2003," OECD Economics Department Working papers, No. 419, OECD Publishing_ 30 DeFraja, G. and F. Delbono, 1989, "Alternative Strategies of a Public Enterprise in Oligopoly," Oxford Economic Papers, 41, 302-11. Eaton, J. and G. M. Grossman, 1986, "Optimal Trade and Industrial Policy under Oligopoly," Quarterly Journal of Economics, 101, 383-406. Fershtman, C., 1990, "The Interdependence Between Owership Status and Market Structure: The Case of Privatization", Economica, 57, 319- 28. Fjell, K. and D. Pal, 1996, " Mixed Oligopoly in the Presence of Foreign Private Firms," Canadian Journal of Economics, 29, 737-43. Haufler, A., G. Schjelderup and F. Stahler, 2005, " Barriers to trade and imperfect competition: The choice of commodity tax base," International Tax and Public Finance, 12, 281-300. Katrak, H., 1977, "Multinational Monopolies and Commercial Policy," Oxford Economic Papers, 29, 283-01. Matsumura, T., 1998, Partial Privatization in Mixed Duopoly, Journal of Public Economics, 70, 473-83. Pal, D. and M.D. White, 1998, "Mixed Oligopoly, Privatization, and Strategic Trade Policy," Southern Economic Journal, 65, 264-81. Pal, D. and M.D. White, 2003," Intra-industry Trade and Strategic Trade Policy in the Presence of Public Firms," International Economic Journal, 17, 29-41. Rodrik, D., 1989, "Optimal Trade Taxes for a Large Country with Non- Atomistic Firms," Journal of International Economics, 26, 157-167. White, Mark D., 1996, "Mixed Oligopoly, Privatization, and Subsidization," Economics Letters, 53, pp 189-195