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Dynamic Inefficiency in an Overlapping Generation Economy with Pollution and Health Costs

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  • MAR�A-JOSÉ GUTIÉRREZ

Abstract

We analyze an overlapping generations model in which pollution arises, in an accumulatively way, from production. Householders do not care directly about the environment, but pollution leads them to incur health costs when they are elderly. We show that the presence of pollution means that the economy more likely to be dynamically inefficient. For these cases we analyze two kinds of tax scheme: one based on production taxes and the other based on capital and wage taxes. We show how to design both schemes to put the economy into the golden rule allocation. We also show that under the production tax scheme young and elderly agents pay less taxes (or receive more transfers) than under the production tax system. Copyright � 2008 Wiley Periodicals, Inc..

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Bibliographic Info

Article provided by Association for Public Economic Theory in its journal Journal of Public Economic Theory.

Volume (Year): 10 (2008)
Issue (Month): 4 (08)
Pages: 563-594

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Handle: RePEc:bla:jpbect:v:10:y:2008:i:4:p:563-594

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Cited by:
  1. Pautrel, Xavier, 2009. "Pollution and life expectancy: How environmental policy can promote growth," Ecological Economics, Elsevier, Elsevier, vol. 68(4), pages 1040-1051, February.
  2. Dimitrios Varvarigos, 2013. "Economic Growth, Health, and the Choice of Polluting Technologies: The Role of Bureaucratic Corruption," Discussion Papers in Economics, Department of Economics, University of Leicester 13/22, Department of Economics, University of Leicester.
  3. Xavier Pautrel, 2009. "Health-enhancing Activities and the Environment: How Competition for Resources Makes the Environmental Policy Beneficial," Working Papers, Fondazione Eni Enrico Mattei 2009.111, Fondazione Eni Enrico Mattei.
  4. Wei-Bin Zhang, 2013. "Dynamic Interactions among Growth, Environmental Change, Habit Formation, and Preference Change," The International Journal of Economic Behavior - IJEB, Faculty of Business and Administration, University of Bucharest, Faculty of Business and Administration, University of Bucharest, vol. 3(1), pages 3-25, December.
  5. Nguyen Thang Dao & Julio Dávila, 2014. "Implementing Steady State Efficiency in Overlapping Generations Economies with Environmental Externalities," Journal of Public Economic Theory, Association for Public Economic Theory, Association for Public Economic Theory, vol. 16(4), pages 620-649, 08.
  6. Emin Gahramanov, 2009. "Tax Evasion and Dynamic Inefficiency," Economics Bulletin, AccessEcon, vol. 29(1), pages 437-443.
  7. Basseti, Thomas & Benos, Nikos & Karagiannis, Stelios, 2010. "How policy can influence human capital accumulation and environment quality," MPRA Paper 21754, University Library of Munich, Germany.
  8. Constant, Karine & Nourry, Carine & Seegmuller, Thomas, 2014. "Population growth in polluting industrialization," Resource and Energy Economics, Elsevier, Elsevier, vol. 36(1), pages 229-247.
  9. Dimitrios Varvarigos & Intan Zakaria, 2013. "Endogenous fertility in a growth model with public and private health expenditures," Journal of Population Economics, Springer, Springer, vol. 26(1), pages 67-85, January.

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