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Environmental policy and inequality: A matter of life and death

Listed author(s):
  • Karine Constant

    ()

    (Université Paris Est, Erudite)

This paper analyzes the economic implications of an environmental policy when we take into account the life expectancy of heterogeneous agents. In a framework in which everyone suffers from pollution, but health status depends also on individual human capital, we find that the economy may be stuck in a trap in which inequalities persistently grow, when the initial pollution intensity of production is too high. Moreover, we emphasize that such inequalities are costly in the long run for the economy, in particular in terms of health and growth. Therefore, we study whether a tax on pollution associated with an investment in pollution abatement can be used to overcome this situation. We show that a stricter environmental policy may allow the economy to escape from the inequality trap while it enhances its long-term growth rate, when initial inequalities are not too high.

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File URL: http://faere.fr/pub/WorkingPapers/Constant_FAERE_WP2017.07.pdf
File Function: First version, 2017
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Paper provided by FAERE - French Association of Environmental and Resource Economists in its series Working Papers with number 2017.07.

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Length: 43 pages
Date of creation: May 2017
Handle: RePEc:fae:wpaper:2017.07
Contact details of provider: Web page: http://www.faere.fr

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