Pollution abatement and partial privatization
Economics Bulletin, 2019, vol. 39, issue 3, 1887-1897
This paper considers a mixed duopoly model where there are spillovers in environmental R&D. We adopt a three-stage game formulated by Haruna and Goel (2018) and investigate the impact of partial privatization on firm's investment in R&D and environmental taxes. We show that if the degree of privatization is relatively low and the spillover effect is significant, the private firm undertakes R&D and the government subsidizes emissions. Our model suggests that the government should never subsidize R&D when both firms invest in R&D. Furthermore, an increase in the degree of privatization is worse for the environment, but partial privatization increases social welfare.
Keywords: Emissions fees; Environmental R&D; Partial privatization; Social welfare (search for similar items in EconPapers)
JEL-codes: L1 L3 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:ebl:ecbull:eb-19-00149
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