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Pollution Effects on Labor Supply and Growth

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  • Stefano Bosi
  • David Desmarchelier
  • Lionel Ragot

Abstract

Some recent empirical contributions have pointed out a significant negative impact of pollution on labor supply. These impacts have been largely ignored in the theoretical literature, which, instead, focused on the case of pollution effects on consumption demand. In this paper, we study the short and long-run effects of pollution in a Ramsey model where pollution and labor supply are nonseparable arguments in households' preferences. We determine sufficient conditions for existence and uniqueness of a long-term equilibrium and we show how large (negative) effects of pollution on labor supply may promotes macroeconomic volatility (deterministic cycles near the steady state) through a flip bifurcation.

Suggested Citation

  • Stefano Bosi & David Desmarchelier & Lionel Ragot, 2013. "Pollution Effects on Labor Supply and Growth," CEEES Paper Series CE3S-05/13, European University at St. Petersburg, Department of Economics.
  • Handle: RePEc:eus:ce3swp:0513
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    References listed on IDEAS

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    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, pages 68-79.
    2. Seegmuller, Thomas & Verch Re, Alban, 2007. "A Note On Indeterminacy In Overlapping Generations Economies With Environment And Endogenous Labor Supply," Macroeconomic Dynamics, Cambridge University Press, pages 423-429.
    3. Richard T. Carson & Phoebe Koundouri & Céline Nauges, 2010. "Arsenic Mitigation in Bangladesh: A Household Labor Market Approach," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 93(2), pages 407-414.
    4. Seegmuller, Thomas & Verch Re, Alban, 2007. "A Note On Indeterminacy In Overlapping Generations Economies With Environment And Endogenous Labor Supply," Macroeconomic Dynamics, Cambridge University Press, pages 423-429.
    5. de Bovenberg, A Lans & Mooij, Ruud A, 1994. "Environmental Levies and Distortionary Taxation," American Economic Review, American Economic Association, pages 1085-1089.
    6. Wolfram Schlenker & W. Reed Walker, 2016. "Airports, Air Pollution, and Contemporaneous Health," Review of Economic Studies, Oxford University Press, vol. 83(2), pages 768-809.
    7. Junxi Zhang, 1999. "Environmental sustainability, nonlinear dynamics and chaos," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), pages 489-500.
    8. Joshua Graff Zivin & Matthew Neidell, 2014. "Temperature and the Allocation of Time: Implications for Climate Change," Journal of Labor Economics, University of Chicago Press, vol. 32(1), pages 1-26.
    9. Joshua Graff Zivin & Matthew Neidell, 2012. "The Impact of Pollution on Worker Productivity," American Economic Review, American Economic Association, pages 3652-3673.
    10. Philippe Michel & Gilles Rotillon, 1995. "Disutility of pollution and endogenous growth," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, pages 279-300.
    11. Joshua Graff Zivin & Matthew Neidell, 2012. "The Impact of Pollution on Worker Productivity," American Economic Review, American Economic Association, pages 3652-3673.
    12. Tahvonen Olli & Kuuluvainen Jari, 1993. "Economic Growth, Pollution, and Renewable Resources," Journal of Environmental Economics and Management, Elsevier, vol. 24(2), pages 101-118, March.
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    Cited by:

    1. Stefano Bosi & David Desmarchelier, 2017. "Are the Laffer curve and the green paradox mutually exclusive?," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 19(5), pages 937-956, October.
    2. Stefano Bosi & David Desmarchelier, 2016. "Pollution and infectious diseases," Working Papers 2016.22, FAERE - French Association of Environmental and Resource Economists.
    3. Stefano Bosi & David Desmarchelier & Lionel Ragot, 2015. "Preferences and pollution cycles," EconomiX Working Papers 2015-36, University of Paris Nanterre, EconomiX.

    More about this item

    Keywords

    pollution; endogenous labor supply; Ramsey model;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth

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