Environmental pollution, health depreciation and labor supply of elderly

Based on an endogenous overlapping generations model of air pollution flow, this study examines the rational utilization of environmental taxation to accelerate health depreciation and enhance pollution control. We investigate the decision-making process for pollution-constrained elderly labor and analyze the crowding-out effects of environmental taxation and private health human capital investment on capital accumulation. The model derivation and numerical simulations indicate that, when elderly labor is effectively employed, there is no absolute dichotomy or inherent trade-off between pollution control and economic development. In this setting, stringent environmental taxation does not permanently reduce capital accumulation if development levels and economic parameters are jointly managed. Conversely, private health investment crowds out savings and cannot fully substitute for public health spending, suggesting that an appropriate level of private health expenditure is essential for effective elderly labor utilization. Empirical analysis using data from the China Health and Retirement Longitudinal Study and relevant environmental datasets confirms a significant negative relationship between air pollution and elderly labor supply, while also demonstrating the moderating role of medical resources. These results provide policy insights that a well-calibrated mix of environmental taxation and balanced health investments can simultaneously achieve pollution control and sustainable economic development.