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Environmental Policy, Education And Growth: A Reappraisal When Lifetime Is Finite

  • Pautrel, Xavier

This article demonstrates that when finite lifetime is introduced in a Lucas (1988) growth model where the source of pollution is physical capital, the environmental policy may enhance the growth rate of a market economy, while pollution does not influence educational activities, labor supply is not elastic and human capital does not enter the utility function. The result arises from the “generational turnover effect” due to finite lifetime. It remains valid under conditions when the education sector uses final output besides time to accumulate human capital. Nevertheless, it does no longer hold when the source of pollution is output. Furthermore, this article demonstrates that ageing reduces the positive influence of the environmental policy when growth is driven by human capital accumulation à la Lucas (1988) and lifetime is finite. It also confirms for finite lifetime the result found by Vellinga (1999) with a single representative agent: environmental care does not influence optimal growth when utility is additive and pollution does not influence the ability of agents to be educated.

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Article provided by Cambridge University Press in its journal Macroeconomic Dynamics.

Volume (Year): 16 (2012)
Issue (Month): 05 (November)
Pages: 661-685

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Handle: RePEc:cup:macdyn:v:16:y:2012:i:05:p:661-685_00
Contact details of provider: Postal: Cambridge University Press, UPH, Shaftesbury Road, Cambridge CB2 8BS UK
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