Pollution and life expectancy: How environmental policy can promote growth
This article investigates the influence of environmental policy (EP) on growth in an AK-type growth model, when finite lifetime is introduced and the link between pollution and life expectancy (through the detrimental impact of pollution on health) is taken into account. Using an overlapping generations model à la Blanchard [Blanchard, O. (1985). Debt, deficits and finite horizon. Journal of Political Economy, 93:223-247], we demonstrate that finite lifetime introduces a "generational turnover effect" which modifies the influence of the EP on growth. Thus, when lifetime is finite and independent from pollution, we show that the "generational turnover effect" limits the detrimental impact of the EP on growth, if agents smooth their consumption over time. When pollution negatively influences life expectancy through health, we demonstrate that the "generational turnover effect" is magnified and that the EP and growth have an inverted U-shaped relationship in the steady-state. In this case, we show that the environmental policy is more likely to promote growth (i.e. it stimulates growth for a wider range of environmental taxes) when the impact of pollution on health is important and/or public expenditures in health are low. Finally, using numerical simulations, we find that for the value of parameters that we have chosen, the EP will be more likely to promote growth when agents smooth consumption over time.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Motohiro Yogo, 2004. "Estimating the Elasticity of Intertemporal Substitution When Instruments Are Weak," The Review of Economics and Statistics, MIT Press, vol. 86(3), pages 797-810, August.
- Paul M Romer, 1999.
"Increasing Returns and Long-Run Growth,"
Levine's Working Paper Archive
2232, David K. Levine.
- Ricci, Francesco, 2007.
"Channels of transmission of environmental policy to economic growth: A survey of the theory,"
Elsevier, vol. 60(4), pages 688-699, February.
- Francesco Ricci, 2004. "Channels of Transmission of Environmental Policy to Economic Growth: A Survey of the Theory," Working Papers 2004.52, Fondazione Eni Enrico Mattei.
- Tetsuo Ono, 2003. "Environmental Tax Policy and Long-Run Economic Growth," The Japanese Economic Review, Japanese Economic Association, vol. 54(2), pages 203-217.
- Raymond Gradus & Sjak Smulders, 1993.
"The trade-off between environmental care and long-term growth—Pollution in three prototype growth models,"
Journal of Economics,
Springer, vol. 58(1), pages 25-51, February.
- Smulders, J.A. & Gradus, R.H.J.M., 1993. "The trade-off between environmental care and long-term growth : Pollution in three proto-type growth models," Other publications TiSEM f3ec6de7-f996-4ac0-b872-0, Tilburg University, School of Economics and Management.
- Oueslati, Walid, 2002. "Environmental policy in an endogenous growth model with human capital and endogenous labor supply," Economic Modelling, Elsevier, vol. 19(3), pages 487-507, May.
- Pautrel, Xavier, 2012.
"Environmental Policy, Education And Growth: A Reappraisal When Lifetime Is Finite,"
Cambridge University Press, vol. 16(05), pages 661-685, November.
- Xavier Pautrel, 2009. "Environmental policy, education and growth: A reappraisal when lifetime is finite," Working Papers hal-00423201, HAL.
- Xavier Pautrel, 2008. "Environmental Policy, Education and Growth: A Reappraisal when Lifetime Is Finite," Working Papers 2008.57, Fondazione Eni Enrico Mattei.
- Ben J. Heijdra & Jenny E Ligthart, 1998.
"The Dynamic Macroeconomic Effects of Tax Policy in an Overlapping Generations Model,"
IMF Working Papers
- Heijdra, Ben J & Ligthart, Jenny E, 2000. "The Dynamic Macroeconomic Effects of Tax Policy in an Overlapping Generations Model," Oxford Economic Papers, Oxford University Press, vol. 52(4), pages 677-701, October.
- Gutiérrez Huerta, María José, 2002.
"Dynamic Inefficiency in an Overlapping Generation Economy with Pollution and Health Costs,"
DFAEII Working Papers
2002-23, University of the Basque Country - Department of Foundations of Economic Analysis II.
- María-José Gutiérrez, 2008. "Dynamic Inefficiency in an Overlapping Generation Economy with Pollution and Health Costs," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 10(4), pages 563-594, 08.
- María José Gutiérrez, 2004. "Dynamic Inefficiency in an Overlapping Generation Economy with Pollution and Health Costs," Economic Working Papers at Centro de Estudios Andaluces E2004/38, Centro de Estudios Andaluces.
- Frank Hettich, 1998. "Growth effects of a revenue-neutral environmental tax reform," Journal of Economics, Springer, vol. 67(3), pages 287-316, October.
- Philippe Michel & Gilles Rotillon, 1995. "Disutility of pollution and endogenous growth," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 6(3), pages 279-300, October.
- Kosempel, Stephen, 2004.
"Finite lifetimes and government spending in an endogenous growth model,"
Journal of Economics and Business,
Elsevier, vol. 56(3), pages 197-210.
- Kosempel, S., 2003. "Finite lifetimes and government spending in an endogenous growth model," Working Papers 2003-13, University of Guelph, Department of Economics and Finance.
- Guvenen, Fatih, 2006.
"Reconciling conflicting evidence on the elasticity of intertemporal substitution: A macroeconomic perspective,"
Journal of Monetary Economics,
Elsevier, vol. 53(7), pages 1451-1472, October.
- M. Fatih Guvenen, 2002. "Reconciling Conflicting Evidence on the Elasticity of Intertemporal Substitution: A Macroeconomic Perspective," RCER Working Papers 491, University of Rochester - Center for Economic Research (RCER), revised Mar 2003.
- Fatih Guvenen, 2005. "Reconciling Conflicting Evidence on the Elasticity of Intertemporal Substitution: A Macroeconomic Perspective," Macroeconomics 0507005, EconWPA.
- Olivier J. Blanchard, 1984.
"Debt, Deficits and Finite Horizons,"
NBER Working Papers
1389, National Bureau of Economic Research, Inc.
- Ding, Weili & Lehrer, Steven F. & Rosenquist, J.Niels & Audrain-McGovern, Janet, 2009. "The impact of poor health on academic performance: New evidence using genetic markers," Journal of Health Economics, Elsevier, vol. 28(3), pages 578-597, May.
When requesting a correction, please mention this item's handle: RePEc:eee:ecolec:v:68:y:2009:i:4:p:1040-1051. 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)
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 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.