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Privatization and the Environment


  • Susumu Cato

    () (Graduate School of Economics, University of Tokyo)


We investigate the privatization policy of an industry where the production process generates emissions. We show that the high degree of negative externality leads to production substitution from the public firm to private firms. Moreover, we show that, if the degree of negative externality is sufficiently high, then a mixed oligopoly is preferable to a pure oligopoly for social welfare, even if the number of firms in the market is large. Furthermore, we consider free entry of private firms.

Suggested Citation

  • Susumu Cato, 2008. "Privatization and the Environment," Economics Bulletin, AccessEcon, vol. 12(19), pages 1-10.
  • Handle: RePEc:ebl:ecbull:eb-08l30002

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    References listed on IDEAS

    1. Baumol,William J. & Oates,Wallace E., 1988. "The Theory of Environmental Policy," Cambridge Books, Cambridge University Press, number 9780521322249, March.
    2. Toshihiro Matsumura & Osamu Kanda, 2005. "Mixed Oligopoly at Free Entry Markets," Journal of Economics, Springer, vol. 84(1), pages 27-48, February.
    3. Kazuhiko Kato, 2006. "Can Allowing to Trade Permits Enhance Welfare in Mixed Oligopoly?," Journal of Economics, Springer, vol. 88(3), pages 263-283, September.
    4. de Fraja, Giovanni & Delbono, Flavio, 1989. "Alternative Strategies of a Public Enterprise in Oligopoly," Oxford Economic Papers, Oxford University Press, vol. 41(2), pages 302-311, April.
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    Cited by:

    1. Xu, Lili & Lee, Sang-Ho, 2018. "The timing of environmental policies with excess burden of taxation in free-entry mixed markets," MPRA Paper 83560, University Library of Munich, Germany.
    2. Shim, Changsub & Hong, Jiyoun, 2016. "Impact of a national plan for future electricity supply on ambient air quality in South Korea," Energy Policy, Elsevier, vol. 88(C), pages 278-288.
    3. Rupayan Pal & Bibhas Saha, 2011. "Environmental outcomes in a model of mixed duopoly," University of East Anglia Applied and Financial Economics Working Paper Series 030, School of Economics, University of East Anglia, Norwich, UK..
    4. repec:eee:reveco:v:50:y:2017:i:c:p:1-7 is not listed on IDEAS
    5. Rupayan Pal & Bibhas Saha, 2014. "Mixed Duopoly and Environment," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 16(1), pages 96-118, February.
    6. Pal, Rupayan & Saha, Bibhas, 2015. "Pollution tax, partial privatization and environment," Resource and Energy Economics, Elsevier, vol. 40(C), pages 19-35.
    7. Kazuhiko Kato, 2013. "Optimal degree of privatization and the environmental problem," Journal of Economics, Springer, vol. 110(2), pages 165-180, October.
    8. Tsai, Tsung-Hsiu & Wang, Chia-Chi & Chiou, Jiunn-Rong, 2016. "Can privatization be a catalyst for environmental R&D and result in a cleaner environment?," Resource and Energy Economics, Elsevier, vol. 43(C), pages 1-13.
    9. Lee, Sang-Ho & Xu, Lili, 2017. "Endogenous timing in private and mixed duopolies with emission taxes," MPRA Paper 80342, University Library of Munich, Germany.
    10. Lee, Sang-Ho & Nakamura, Tamotsu & Park, Chul-Hi, 2017. "Optimal Privatization Policy in a Mixed Eco-Industry in the Presence of Commitments on Abatement Technologies," MPRA Paper 80902, University Library of Munich, Germany.

    More about this item


    production substitution;

    JEL classification:

    • L3 - Industrial Organization - - Nonprofit Organizations and Public Enterprise
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance


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