Relocation and public ownership of firms

Barcena-Ruiz, Juan Carlos, and Garzon, Maria Begona-Relocation and public ownership of firms This paper studies how the structure of markets in advanced countries is affected by the relocation of domestic firms to countries where wage costs are lower. We consider that private firms compete in the product market with firms partly owned by the government (semipublic firms). Assuming a mixed duopoly, we obtain the counterintuitive result that, for a certain range of values of the parameters of the model, in equilibrium, only the semipublic firm relocates. Moreover, if only one firm changes its location, social welfare is greater if it is the semipublic firm that relocates. J. Japanese Int. Economies 23 (1) (2009) 71-85. Departamento de Fundamentos del Analisis Economico 1. Facultad de Ciencias Economicas y Empresariales, Universidad del Pais Vasco, Avenida Lehendakari Aguirre, 83, 48015 Bilbao, Spain. (c) 2009 Elsevier Inc. All rights reserved.