IDEAS home Printed from https://ideas.repec.org/a/eee/ecmode/v52y2016ipbp310-321.html
   My bibliography  Save this article

Reassessing the effects of environmental taxation when pollution affects health over the life-cycle

Author

Listed:
  • Mathieu-Bolh, Nathalie
  • Pautrel, Xavier

Abstract

We introduce the link between pollution, morbidity and productivity over the life-cycle in a two-period overlapping generations model. As the environmental tax improves the health-profile over the life-cycle, it influences saving, investment in health, labor supply and retirement. As a result, we identify effects of environmental taxation beyond the standard crowding-out and productivity effects captured by the past literature. We show that whether those effects are positive or negative for the economy crucially depends on the degree of substitutability between young and old labor. Our numerical examples suggest that that those new effects alleviate the negative effects of environmental taxation on output and decrease potential positive welfare effects.

Suggested Citation

  • 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.
  • Handle: RePEc:eee:ecmode:v:52:y:2016:i:pb:p:310-321
    DOI: 10.1016/j.econmod.2015.09.002
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0264999315002485
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Hanna, Rema & Oliva, Paulina, 2015. "The effect of pollution on labor supply: Evidence from a natural experiment in Mexico City," Journal of Public Economics, Elsevier, vol. 122(C), pages 68-79.
    2. Kevin M. Murphy & Finis Welch, 1992. "The Structure of Wages," The Quarterly Journal of Economics, Oxford University Press, vol. 107(1), pages 285-326.
    3. Xavier Pautrel, 2012. "Pollution, Private Investment in Healthcare, and Environmental Policy," Scandinavian Journal of Economics, Wiley Blackwell, vol. 114(2), pages 334-357, June.
    4. Eric French, 2005. "The Effects of Health, Wealth, and Wages on Labour Supply and Retirement Behaviour," Review of Economic Studies, Oxford University Press, vol. 72(2), pages 395-427.
    5. Xepapadeas, Anastasios, 2005. "Economic growth and the environment," Handbook of Environmental Economics,in: K. G. Mäler & J. R. Vincent (ed.), Handbook of Environmental Economics, edition 1, volume 3, chapter 23, pages 1219-1271 Elsevier.
    6. Dwyer, Debra Sabatini & Mitchell, Olivia S., 1999. "Health problems as determinants of retirement: Are self-rated measures endogenous?," Journal of Health Economics, Elsevier, vol. 18(2), pages 173-193, April.
    7. Cropper, M L, 1977. "Health, Investment in Health, and Occupational Choice," Journal of Political Economy, University of Chicago Press, vol. 85(6), pages 1273-1294, December.
    8. David Card & Thomas Lemieux, 2001. "Can Falling Supply Explain the Rising Return to College for Younger Men? A Cohort-Based Analysis," The Quarterly Journal of Economics, Oxford University Press, vol. 116(2), pages 705-746.
    9. Edward C. Prescott, 2004. "Why do Americans work so much more than Europeans?," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Jul, pages 2-13.
    10. Imrohoroglu, Selahattin & Kitao, Sagiri, 2009. "Labor supply elasticity and social security reform," Journal of Public Economics, Elsevier, vol. 93(7-8), pages 867-878, August.
    11. Göran Östblom & Eva Samakovlis, 2007. "Linking health and productivity impacts to climate policy costs: a general equilibrium analysis," Climate Policy, Taylor & Francis Journals, vol. 7(5), pages 379-391, September.
    12. Jerry A. Hausman & Bart D. Ostro & David A. Wise, 1984. "Air Pollution and Lost Work," NBER Working Papers 1263, National Bureau of Economic Research, Inc.
    13. Tom Chang & Joshua Graff Zivin & Tal Gross & Matthew Neidell, 2016. "Particulate Pollution and the Productivity of Pear Packers," American Economic Journal: Economic Policy, American Economic Association, vol. 8(3), pages 141-169, August.
    14. Domeij David & Johannesson Magnus, 2006. "Consumption and Health," The B.E. Journal of Macroeconomics, De Gruyter, vol. 6(1), pages 1-30, May.
    15. Cropper, M L, 1981. "Measuring the Benefits from Reduced Morbidity," American Economic Review, American Economic Association, vol. 71(2), pages 235-240, May.
    16. Gianmarco I. P. Ottaviano & Giovanni Peri, 2016. "Rethinking The Effect Of Immigration On Wages," World Scientific Book Chapters,in: The Economics of International Migration, chapter 2, pages 35-80 World Scientific Publishing Co. Pte. Ltd..
    17. Inge Mayeres & Denise Van Regemorter, 2008. "Modelling the Health Related Benefits of Environmental Policies and Their Feedback Effects: A CGE Analysis for the EU Countries with GEM-E3," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 135-150.
    18. 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.
    19. Cassou, Steven P. & Gorostiaga, Arantza & Uribe-Zubiaga, Iker, 2013. "Policy effects of the elasticity of substitution across labor types in life cycle models," Economic Modelling, Elsevier, vol. 35(C), pages 59-70.
    20. Aloi, Marta & Tournemaine, Frederic, 2011. "Growth effects of environmental policy when pollution affects health," Economic Modelling, Elsevier, vol. 28(4), pages 1683-1695, July.
    21. Xin Xu & Robert Kaestner, 2010. "The Business Cycle and Health Behaviors," NBER Working Papers 15737, National Bureau of Economic Research, Inc.
    22. Nathalie Mathieu-Bolh & Xavier Pautrel, 2011. "Taxe environnementale, morbidité et profil de productivité," Revue économique, Presses de Sciences-Po, vol. 62(3), pages 501-509.
    23. Natacha Raffin, 2012. "Childrens environmental health, education, and economic development," Canadian Journal of Economics, Canadian Economics Association, vol. 45(3), pages 996-1022, August.
    24. Rosa Aísa & Fernando Pueyo, 2004. "Endogenous longevity, health and economic growth: a slow growth for a longer life?," Economics Bulletin, AccessEcon, vol. 9(3), pages 1-10.
    25. Pelkowski, Jodi Messer & Berger, Mark C., 2004. "The impact of health on employment, wages, and hours worked over the life cycle," The Quarterly Review of Economics and Finance, Elsevier, vol. 44(1), pages 102-121, February.
    26. Adriaan Kalwij & Arie Kapteyn & Klaas Vos, 2010. "Retirement of Older Workers and Employment of the Young," De Economist, Springer, vol. 158(4), pages 341-359, November.
    27. Kremer, Michael & Thomson, James, 1998. "Why Isn't Convergence Instantaneous? Young Workers, Old Workers, and Gradual Adjustment," Journal of Economic Growth, Springer, vol. 3(1), pages 5-28, March.
    28. Zhang, Wei & Bansback, Nick & Anis, Aslam H., 2011. "Measuring and valuing productivity loss due to poor health: A critical review," Social Science & Medicine, Elsevier, vol. 72(2), pages 185-192, January.
    29. Grossman, Michael, 1972. "On the Concept of Health Capital and the Demand for Health," Journal of Political Economy, University of Chicago Press, vol. 80(2), pages 223-255, March-Apr.
    30. Stokey, Nancy L, 1998. "Are There Limits to Growth?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(1), pages 1-31, February.
    31. Contoyannis, Paul & Jones, Andrew M., 2004. "Socio-economic status, health and lifestyle," Journal of Health Economics, Elsevier, vol. 23(5), pages 965-995, September.
    32. Joshua Graff Zivin & Matthew Neidell, 2012. "The Impact of Pollution on Worker Productivity," American Economic Review, American Economic Association, vol. 102(7), pages 3652-3673, December.
    33. Jonathan Gruber & Kevin Milligan & David A. Wise, 2010. "Introduction and Summary," NBER Chapters,in: Social Security Programs and Retirement around the World: The Relationship to Youth Employment, pages 1-45 National Bureau of Economic Research, Inc.
      • Jonathan Gruber & David A. Wise, 2004. "Introduction and Summary," NBER Chapters,in: Social Security Programs and Retirement around the World: Micro-Estimation, pages 1-40 National Bureau of Economic Research, Inc.
    34. Cawley, John & Ruhm, Christopher J., 2011. "The Economics of Risky Health Behaviors," Handbook of Health Economics, Elsevier.
    35. John Mullahy & Stephanie Robert, 2010. "No time to lose: time constraints and physical activity in the production of health," Review of Economics of the Household, Springer, vol. 8(4), pages 409-432, December.
    36. Hebbink, G. E., 1993. "Production factor substitution and employment by age group," Economic Modelling, Elsevier, vol. 10(3), pages 217-224, July.
    37. Xu, Xin, 2013. "The business cycle and health behaviors," Social Science & Medicine, Elsevier, vol. 77(C), pages 126-136.
    38. Anni Huhtala & Eva Samakovlis, 2007. "Flows of Air Pollution, Ill Health and Welfare," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 37(2), pages 445-463, June.
    39. Bloom, David E. & Canning, David & Sevilla, Jaypee, 2004. "The Effect of Health on Economic Growth: A Production Function Approach," World Development, Elsevier, vol. 32(1), pages 1-13, January.
    40. Jesse Schwartz & Robert Repetto, 2000. "Nonseparable Utility and the Double Dividend Debate: Reconsidering the Tax-Interaction Effect," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 15(2), pages 149-157, February.
    41. Williams III, Roberton C., 2003. "Health effects and optimal environmental taxes," Journal of Public Economics, Elsevier, vol. 87(2), pages 323-335, February.
    42. John Mullahy & Stephanie A. Robert, 2008. "No Time to Lose? Time Constraints and Physical Activity," NBER Working Papers 14513, National Bureau of Economic Research, Inc.
    43. Axel Börsch-Supan & Reinhold Schnabel, 2010. "Early Retirement and Employment of the Young in Germany," NBER Chapters,in: Social Security Programs and Retirement around the World: The Relationship to Youth Employment, pages 147-166 National Bureau of Economic Research, Inc.
    44. Chou, Shin-Yi & Liu, Jin-Tan & Hammitt, James K., 2003. "National Health Insurance and precautionary saving: evidence from Taiwan," Journal of Public Economics, Elsevier, vol. 87(9-10), pages 1873-1894, September.
    Full references (including those not matched with items on IDEAS)

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecmode:v:52:y:2016:i:pb:p:310-321. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu). General contact details of provider: http://www.elsevier.com/locate/inca/30411 .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.