Partial privatization, producer services, and unemployment in developing countries

Existing literature argues that privatization tends to lower the output of the mixed‐ownership firms in the manufacturing. Nevertheless, since manufacturing has closely linked to producer services recently, by incorporating producer services into the analysis, this paper investigates the impacts of partial privatization of the mixed‐ownership firm in the manufacturing sector on output, unemployment, and social welfare in developing countries in a three‐sector general equilibrium model. The main conclusion is that partial privatization would lower unemployment and raise output conditionally if the profit of producer service firms is zero in the long run. Besides, the welfare impacts of partial privatization in the short and long run are considered. Compared with the existing literature, this paper provides a new perspective and derives some new results.