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Growth effects of environmental policy when pollution affects health

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  • Aloi, Marta
  • Tournemaine, Frederic

Abstract

In this paper, we develop a R&D-based growth model with a pollution externality and a health production sector. We study how health-impairing pollution affects long term growth, and the effect of an emissions' reduction policy (tax). We show that a tighter environmental tax has positive effects on growth via two channels. On the one hand, it improves workers' health and, thereby, productivity; on the other hand, it induces a reallocation of resources towards R&D and, thereby, higher research intensity. The size of the growth effect of a tighter environmental tax, and the level of the optimal environmental tax, are both positively correlated with the weight individuals place on health relative to consumption. As for welfare, a tighter environmental tax brings about utility gains in the long run and, potentially, also in the short run.

Suggested Citation

  • Aloi, Marta & Tournemaine, Frederic, 2011. "Growth effects of environmental policy when pollution affects health," Economic Modelling, Elsevier, vol. 28(4), pages 1683-1695, July.
  • Handle: RePEc:eee:ecmode:v:28:y:2011:i:4:p:1683-1695
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Nathalie Mathieu-Bolh & Xavier Pautrel, 2014. "Environmental taxation, health and the life-cycle," Working Papers hal-00930936, HAL.
    2. repec:eee:ecmode:v:64:y:2017:i:c:p:539-552 is not listed on IDEAS
    3. Karine Constant & Natacha Raffin, 2016. "Environnement, croissance et inégalités : le rôle particulier du canal de la santé," Revue française d'économie, Presses de Sciences-Po, vol. 0(3), pages 9-29.
    4. Mathieu-Bolh, Nathalie & Pautrel, Xavier, 2016. "Reassessing the effects of environmental taxation when pollution affects health over the life-cycle," Economic Modelling, Elsevier, vol. 52(PB), pages 310-321.
    5. Karine Constant, 2015. "Environmental Policy and Inequality: A Matter of Life and Death," Working Papers halshs-01174052, HAL.
    6. Oueslati, Walid, 2015. "Growth and welfare effects of environmental tax reform and public spending policy," Economic Modelling, Elsevier, vol. 45(C), pages 1-13.

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