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Environmental Policy and Inequality: A Matter of Life and Death

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  • Karine Constant

    () (Aix-Marseille University (Aix-Marseille School of Economics), CNRS & EHESS)

Abstract

This paper analyzes the economic implications of an environmental policy when we take into account the life expectancy of heterogeneous agents. In a framework where everyone suffers from pollution, but health status depends also on individual human capital, we find that the economy may be stuck in a trap where inequalities persistently grow, when the initial level of pollution is too high. Therefore, we study whether a tax on pollution associated with an investment in pollution abatement can be used to reduce inequalities and to improve endogenous growth. We obtain that a tighter environmental policy may allow the economy to escape the inequality trap and hence to converge to a long-term equilibrium without inequality, while it enhances the long-term growth rate. However, if inequalities or pollution are initially too high, such a result does not hold for reasonable tax rates.

Suggested Citation

  • Karine Constant, 2015. "Environmental Policy and Inequality: A Matter of Life and Death," AMSE Working Papers 1527, Aix-Marseille School of Economics, Marseille, France.
  • Handle: RePEc:aim:wpaimx:1527
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    Cited by:

    1. Can Askan Mavi, 2016. "Uncertain Catastrophic Events : Another Source of Environmental Traps ?," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-01275174, HAL.
    2. 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.
    3. repec:hal:wpaper:halshs-01275174 is not listed on IDEAS

    More about this item

    Keywords

    environmental policy; endogenous growth; human capital; Inequality; longevity;

    JEL classification:

    • I15 - Health, Education, and Welfare - - Health - - - Health and Economic Development
    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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