We visit the role of privatization in the location decision of firms in an industry where no firm can produce all varieties demanded. We demonstrate that the Nash equilibrium locations are socially optimal, in the presence of a publicly owned firm, notwithstanding the degree of privatization.

In this paper, a Harris-Todaro migration model is developed with the urban manufacturing sector supplying a crucial input for the rural sector. Capital is region specific but flows freely between two urban sectors. Final goods are traded and have exogenously fixed prices. If this economy imposes...