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Pollution, Public Health Care, and Life Expectancy when Inequality Matters

In: Dynamic Optimization in Environmental Economics

Author

Listed:
  • Andreas Schaefer

    (University of Leipzig)

  • Alexia Prskawetz

    (Wittgenstein Centre for Demography and Global Human Capital (IIASA, VID/ÖAW, WU)
    Vienna University of Technology (TU))

Abstract

We analyze the link between economic inequality in terms of wealth, life expectancy, health care and pollution. The distribution of wealth is decisive for the number of households investing in human capital. Moreover, the willingness to invest in human capital depends on agents’ life expectancy which determines the length of the amortization period of human capital investments. Life expectancy is positively affected by public health care expenditures but adversely affected by the pollution stock generated by aggregate production. Our model accounts for an endogenous take-off in terms of human capital investments. Higher initial inequality delays the take-off because a given set of policies (abatement measures and public health care) is less effective in improving agents’ survival probabilities. We compare a change in taxes to a change in expenditure shares on health and abatement given different amounts of (initial) inequality. The advantage of the latter as compared to the former is the achieved increase in the tax base which induces more expenditures on health care and abatement measures, such that an even higher economic activity is compatible with a similar level of long-run pollution.

Suggested Citation

  • Andreas Schaefer & Alexia Prskawetz, 2014. "Pollution, Public Health Care, and Life Expectancy when Inequality Matters," Dynamic Modeling and Econometrics in Economics and Finance, in: Elke Moser & Willi Semmler & Gernot Tragler & Vladimir M. Veliov (ed.), Dynamic Optimization in Environmental Economics, edition 127, pages 127-154, Springer.
    • Handle: RePEc:spr:dymchp:978-3-642-54086-8_6
    DOI: 10.1007/978-3-642-54086-8_6
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    Cited by:

    1. Dugan, Anna & Prskawetz, Alexia & Raffin, Natacha, 2022. "The Environment, Life Expectancy and Growth in Overlapping Generations Models: A Survey," ECON WPS - Working Papers in Economic Theory and Policy 01/2022, TU Wien, Institute of Statistics and Mathematical Methods in Economics, Economics Research Unit.

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