Can privatization be a catalyst for environmental R&D and result in a cleaner environment?

Tsung Hsiu Tsai, Chia Chi Wang, Jiunn Rong Chiou

Research output: Contribution to journalArticlepeer-review

20 Scopus citations

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 languageEnglish
Pages (from-to)1-13
Number of pages13
JournalResource and Energy Economics
Volume43
DOIs
StatePublished - 1 Feb 2016

Keywords

  • Environmental R and D
  • Environmental taxes
  • Mixed duopoly
  • Privatization

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