Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/119683
Authors: 
Auriol, Emmanuelle
Picard, Pierre M.
Year of Publication: 
2002
Series/Report no.: 
Nota di Lavoro, Fondazione Eni Enrico Mattei 75.2002
Abstract: 
In this paper, we study the impact of government's budget constraint on the optimal industrial policy in industries with increasing returns to scale. We show that privatization is preferred to regulation for intermediate values of the shadow cost of public funds (i.e., the Lagrange multiplier of the government's budget constraint). However, the advantage of privatization is likely to disappear once the product market allows the entry of more than one firm.In this paper, we study the impact of government's budget constraint on the optimal industrial policy in industries with increasing returns to scale. We show that privatization is preferred to regulation for intermediate values of the shadow cost of public funds (i.e., the Lagrange multiplier of the government's budget constraint). However, the advantage of privatization is likely to disappear once the product market allows the entry of more than one firm.
Document Type: 
Working Paper

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