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Pollution tax, partial privatization and environment

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  • Pal, Rupayan
  • Saha, Bibhas

Abstract

Considering a differentiated mixed duopoly we show that when privatization and pollution tax are used together environmental damage will be non-monotone in the level of privatization, and optimal privatization is always partial privatization. Whether privatization will improve the environment or not depends on the public firm's concern for environment. If the public firm is unconcerned about environment, the socially optimal privatization will also damage the environment most. But when the public firm is concerned about environment, privatization will improve the environment. Generally, the relationship between optimal privatization and product substitutability is also non-monotone and inverted U-shaped.

Suggested Citation

  • Pal, Rupayan & Saha, Bibhas, 2015. "Pollution tax, partial privatization and environment," Resource and Energy Economics, Elsevier, vol. 40(C), pages 19-35.
    • Handle: RePEc:eee:resene:v:40:y:2015:i:c:p:19-35
    DOI: 10.1016/j.reseneeco.2015.01.004
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    References listed on IDEAS

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    More about this item

    Keywords

    Privatization; Differentiated mixed duopoly; Environmental damage; Environmental tax; Social welfare;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out

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