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Modelling the health related benefits of environmental policies and their feedback effects, a CGE analysis for the EU countries with GEM-E3

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Denise Van Regemorter
Inge Mayeres

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Abstract

A number of recent studies on taxation in the presence of externalities in a second-best framework consider the implications of taking into account the feedback effects of environmental quality. This paper explores by means of GEM-E3, a computable general equilibrium model for the EU countries, the importance of the feedback effects of the health related benefits from an environmental policy. The modelling framework implemented in GEM-E3 allows for three channels through which the feedback can occur: a decrease in medical expenditure, an increase in the consumers" available time and an increase of labour productivity in the production sectors. The results show that the explicit modelling of the health related effect of air pollution on consumers and producers allows for a better evaluation of the impact of environmental policies on private consumption and employment. However, in terms of global effect, the impacts of the feedback are small, compared to the standard GEM-E3 model where the health related benefits are evaluated ex-post

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Paper provided by Society for Computational Economics in its series Computing in Economics and Finance 2004 with number 39.

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Date of creation: 11 Aug 2004
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Handle: RePEc:sce:scecf4:39

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Related research
Keywords: applied general equilibrium model; non-separable externalities; CO2 tax; environment; ancillary benefits;

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Find related papers by JEL classification:
D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
D62 - Microeconomics - - Welfare Economics - - - Externalities

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  1. Jesse Schwartz & Robert Repetto, 2000. "Nonseparable Utility and the Double Dividend Debate: Reconsidering the Tax-Interaction Effect," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 15(2), pages 149-157, February. [Downloadable!] (restricted)
  2. Gerking, Shelby & Stanley, Linda R, 1986. "An Economic Analysis of Air Pollution and Health: The Case of St. Louis," The Review of Economics and Statistics, MIT Press, vol. 68(1), pages 115-21, February. [Downloadable!] (restricted)
  3. Mayeres, Inge & Proost, Stef, 1997. " Optimal Tax and Public Investment Rules for Congestion Type of Externalities," Scandinavian Journal of Economics, Blackwell Publishing, vol. 99(2), pages 261-79, June. [Downloadable!] (restricted)
  4. Williams, Roberton III, 2002. "Environmental Tax Interactions when Pollution Affects Health or Productivity," Journal of Environmental Economics and Management, Elsevier, vol. 44(2), pages 261-270, September. [Downloadable!] (restricted)
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