The model of stimulating the privatization process for state-owned enterprises

Publication type Article
Status Published
Occupation: Chief scientific researcher
Affiliation: Central Economics and Mathematics Institute, Russian Academy of Sciences
Address: Moscow, Russia
Occupation: Leading research associate
Affiliation: Central Economics and Mathematics Institute, Russian Academy of Sciences
Address: Russia
Journal nameEkonomika i matematicheskie metody
EditionVolume 57 Issue 2

The paper describes a model which allows setting and solving the problem of stimulating the privatization process for state-owned enterprises with the help of tax holidays. The model assumes the possibility to choose the moment of privatization, as well as the stochastic behavior of the enterprise’s profits and its change after privatization. The proposed scheme allows to find the optimal (in NPV criterion of the buyer) time of privatization and the optimal (in integral budgetary effect criterion) duration of tax holidays. In the case when the profit before and after privatization is modeled by random processes of geometric Brownian motion, the explicit formulas are obtained for the optimal time of privatization and the optimal duration of tax holidays. We derive the conditions, under which the optimal tax holidays have zero, or positive duration, or do not exist. Besides, we study the dependence of both the optimal time of privatization and the optimal tax holidays on privatization cost and the tax burden to enterprises.

KeywordsKeywords: privatization, state-own enterprises, budgetary effect, uncertainty, time of privatization, tax holidays.
AcknowledgmentThe study is supported by Russian Foundation for Basic Research (project 18-010-00666).
Publication date25.06.2021
Number of characters33483
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