Abstract
In this paper, we aim to explore the influence of budget constraint privatization policy in the context of mixed duopoly to examine whether privatization policy is dependent upon the unionization structure with labour productivity difference. We showed that, when the unions put equal weights on the wages and the numbers employment, the social welfare pre-privatization is always higher than the one post-privatization regardless of the type of unionization; the government should not privatize the public firm, and nationalization policy should be retained because it will provide a higher rent for the union. Furthermore, union(s) opposes the privatization policy in the presence of budget constraint and union structure.
Highlights
We aim to explore the influence of budget constraint privatization policy in the context of mixed duopoly to examine whether privatization policy is dependent upon the unionization structure with labour productivity difference
We showed that, when the unions put equal weights on the wages and the numbers employment, the social welfare pre-privatization is always higher than the one post-privatization regardless of the type of unionization; the government should not privatize the public firm, and nationalization policy should be retained because it will provide a higher rent for the union
Privatize the public firm?6 In this paper, we aim to explore the influence of budget constraint on privatization policy in the context of mixed duopoly to examine whether privatization policy is dependent upon the unionization structure with labour productivity difference
Summary
The research on privatization policy is numerous (see De Fraja & Delbono, 1989; De Fraja & Delbono, 1990; Matsumura, 1998; Wang & Chen, 2010 and thereafter), the implications of unionization structure on whether the public firm should be privatized were seldom thoroughly analyzed.5 Liu and Lo (2007) study the structure of union-wage Nash bargaining and it’s implication on privatization, and show that centralized bargaining is better than decentralized bargaining for welfare improvement They do not consider the influence of labor productivity difference, budget constraint of public firm, and discriminatory wages.
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