Abstract
In this paper we explore whether privatization helps to catalyze a firm's environmental research and development (ER&D) and improve environmental quality. By defining ER&D as the effort undertaken by a firm to reduce its pollution per unit of output, we find in a duopoly framework that privatization cannot catalyze both public and private firms' ER&D efforts simultaneously; it can increase one but decrease the other firm's investment, or it may even lower both firms' ER&D investments. Moreover, when production causes severe environmental damage, or the imposition of environmental taxes poorly internalize the pollution externality, privatization may result in a poorer environment. For the sake of having a cleaner environment, policy-makers can impose higher environmental taxes on a highly polluting industry when it is being privatized.
Original language | English |
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Pages (from-to) | 1-13 |
Number of pages | 13 |
Journal | Resource and Energy Economics |
Volume | 43 |
DOIs | |
State | Published - 1 Feb 2016 |
Keywords
- Environmental R and D
- Environmental taxes
- Mixed duopoly
- Privatization