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.
|頁（從 - 到）||1-13|
|期刊||Resource and Energy Economics|
|出版狀態||已出版 - 1 2月 2016|