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Longevity and environmental quality in an OLG model

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  • JOUVET, Pierre-André
  • PESTIEAU, Pierre

    (Université catholique de Louvain (UCL). Center for Operations Research and Econometrics (CORE))

  • PONTHIERE, Gregory

Abstract

Whereas existing OLG models with endogenous longevity neglect the impact of environmental quality on mortality, this paper studies the design of the optimal public intervention in a two-period OLG model where longevity is influenced positively by health expenditures, but negatively by pollution due to production. It is shown that if individuals, when choosing how much to spend on health, do not internalize the impact of their decision on environmental quality (i.e. the space available for each person), the decentralization of the social optimum requires a tax not only on capital income, but also, on health expenditures. The sensitivity of the optimal second-best public intervention is also explored numerically.

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Bibliographic Info

Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2007069.

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Date of creation: 01 Sep 2007
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Handle: RePEc:cor:louvco:2007069

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Related research

Keywords: longevity; health care; natural environment; pollution;

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References

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  1. Marie-Louise Leroux & Pierre Pestieau & Grégory Ponthière, 2008. "Optimal linear taxation under endogenous longevity," PSE Working Papers halshs-00586241, HAL.
  2. de la Croix,David & Michel,Philippe, 2002. "A Theory of Economic Growth," Cambridge Books, Cambridge University Press, number 9780521806428, October.
  3. John, A & Pecchenino, R, 1994. "An Overlapping Generations Model of Growth and the Environment," Economic Journal, Royal Economic Society, vol. 104(427), pages 1393-1410, November.
  4. PESTIEAU, Pierre & PONTHIERE, Grégory & SATO, Motohiro, . "Longevity, health spending, and pay-as-you-go pensions," CORE Discussion Papers RP -2029, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  5. Bhattacharya, Joydeep & Qiao, Xue, 2005. "Public and Private Expenditures on Health in a Growth Model," Staff General Research Papers 12378, Iowa State University, Department of Economics.
  6. Martin Browning & Lars Peter Hansen & James J. Heckman, 1999. "Micro Data and General Equilibrium Models," Discussion Papers 99-10, University of Copenhagen. Department of Economics.
  7. JOUVET, Pierre-André & MICHEL, Philippe & VIDAL, Jean-Pierre, 1997. "Intergenerational altruism and the environment," CORE Discussion Papers 1997041, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  8. Shankha Chakraborty, 2002. "Endogenous Lifetime and Economic Growth," University of Oregon Economics Department Working Papers 2002-03, University of Oregon Economics Department, revised 26 Jan 2002.
  9. Philippe Michel & Gilles Rotillon, 1995. "Disutility of pollution and endogenous growth," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 6(3), pages 279-300, October.
  10. Victoria Cramer & Svenn Torgersen & Einar Kringlen, 2004. "Quality of Life in a City: The Effect of Population Density," Social Indicators Research, Springer, vol. 69(1), pages 103-116, October.
  11. John, A. & Pecchenino, R. & Schimmelpfennig, D. & Schreft, S., 1995. "Short-lived agents and the long-lived environment," Journal of Public Economics, Elsevier, vol. 58(1), pages 127-141, September.
  12. Jie Zhang & Junsen Zhang & Michael Leung, 2006. "Health investment, saving, and public policy," Canadian Journal of Economics, Canadian Economics Association, vol. 39(1), pages 68-93, February.
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