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...

Power market integration is analyzed in a two-country model with nationally regulated firms and costly public funds. If the generation costs between the two countries are too similar, negative business stealing outweighs efficiency gains so that the subsequent integration welfare decreases in...

"The paper analyzes governments' tradeoff between fiscal benefits and consumer surplus in privatization reforms of noncompetitive industries in developing countries. Under privatization, the control rights are transferred to private interests so that public subsidies decline. This benefit for...

This paper studies the incentives that developing countries have to protect intellectual properties rights (IPR). On the one hand, free-riding on rich countries technology reduces their investment cost in R&D. On the other hand, firm that violates IPR cannot legally export in a country that...