The Welfare Effect of the Privatization and the Transboundary Pollution

This paper analyzes the welfare effect of the privatization of the polluting firm under the situation in which the transboundary pollution exists. The paperʼs characteristic is considering the situation that the degree of the influence that the exhaust of the pollution emission effects on the environment can take various levels. This paper makes the following conclusions. When the effect that emission gives the environmental damage is small (large), the privatization will decrease (increase) the output of the good in the region. These results are unlike those in previous studies. With regard to the problem of the optimal policy decision of the government, this paper demonstrates the following. When the effect that emission gives the environmental damage is small (large), the optimal policy decision of the government is the (not) privatization. Moreover, when the effect is very small, the optimal policy decision of the government is the not privatization