Pollution, mortality and optimal environmental policy
AbstractWe study an overlapping generations economy in which environmental degradation results from economic activity and affects agents' uncertain lifetimes. Life expectancy depends positively on economic activity and negatively on the stock of pollution. This can make the growth-survival relationship convex over some region and lead to two non-trivial steady states, with one a poverty trap. Uniform abatement taxes can cause the poverty trap to widen while increasing incomes at the high steady state. We also study the properties and dynamics of an optimal second-best abatement tax. It is non-homogeneous and increasing in the capital stock, and leads to a variety of dynamic possibilities, including non-existence and multiplicity of steady states, and cycles around some of the steady states, where there were none under exogenous taxes. Thus, optimal taxes can be an independent source of non-linearities.
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Bibliographic InfoPaper provided by Department of Economics, City University London in its series Working Papers with number 12/07.
Date of creation: 2012
Date of revision:
Contact details of provider:
Postal: Department of Economics, Social Sciences Building, City University London, Whiskin Street, London, EC1R 0JD, United Kingdom,
Phone: +44 (0)20 7040 8500
Web page: http://www.city.ac.uk
More information through EDIRC
Overlapping generations model; poverty traps; non-convexities; multiple steady states; pollution; optimal environmental policy; optimal abatement tax;
Other versions of this item:
- Aditya Goenka & Saqib Jafarey & William Pouliot, 2012. "Pollution, Mortality and Optimal Environmental Policy," Discussion Papers 12-05, Department of Economics, University of Birmingham.
- O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
- O13 - Economic Development, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
- O23 - Economic Development, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development
- O44 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-11-03 (All new papers)
- NEP-DEM-2012-11-03 (Demographic Economics)
- NEP-DGE-2012-11-03 (Dynamic General Equilibrium)
- NEP-ENE-2012-11-03 (Energy Economics)
- NEP-ENV-2012-11-03 (Environmental Economics)
- NEP-PBE-2012-11-03 (Public Economics)
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