Economic Integration and Privatization of Publicly-owned Firms

Resumen

We analyse in this paper whether it should be the government of each country that decides whether to privatise a publicly-owned firm (non integration) or whether a supra-national authority should decide whether publicly-owned companies in the different countries should be privatised (economic integration). We assume that there are two countries which form a single market in which there is free trade and each country has one publicly-owned company and n private companies. We show that the aggregate social welfare is greater if there is a supra-national authority which decides whether or not privatise publicly-owned companies. Moreover, we obtain that it is better that the publicly-owned companies be owned by the countries in which they are located instead of that these firms be owned by the supranational authority.