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Longevity and environmental quality in an OLG model

Author

Listed:
  • Pierre-André Jouvet

    (EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)

  • Pierre Pestieau

    (PSE - Paris-Jourdan Sciences Economiques - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics, CORE - Center of Operation Research and Econometrics [Louvain] - UCL - Université Catholique de Louvain)

  • Grégory Ponthière

    (PSE - Paris-Jourdan Sciences Economiques - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics)

Abstract

Whereas existing OLG models with endogenous longevity neglect the impact of environmental quality on mortality, this paper studies the design of the optimal public policy in a two-period OLG model where longevity is influenced positively by health expenditures, but negatively by pollution due to production. It is shown that if agents, when choosing how much to spend on health, do not internalize the impact of their decision on environmental quality (i.e. the space available for each person), the decentralization of the social optimum requires a tax not only on capital income (to internalize the pollution externality), but, also, on health spending (to internalize the congestion externality). We also examine the second-best policy under a limited set of taxation instruments, and explore its sensitivity to the pollution process and to individual preferences.

Suggested Citation

  • Pierre-André Jouvet & Pierre Pestieau & Grégory Ponthière, 2010. "Longevity and environmental quality in an OLG model," Post-Print halshs-00754437, HAL.
  • Handle: RePEc:hal:journl:halshs-00754437
    DOI: 10.1007/s00712-010-0142-3
    Note: View the original document on HAL open archive server: https://hal-pjse.archives-ouvertes.fr/halshs-00754437
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    References listed on IDEAS

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    1. Victoria Cramer & Svenn Torgersen & Einar Kringlen, 2004. "Quality of Life in a City: The Effect of Population Density," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 69(1), pages 103-116, October.
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    6. Marie-Louise Leroux & Pierre Pestieau & Gregory Ponthiere, 2011. "Optimal linear taxation under endogenous longevity," Journal of Population Economics, Springer;European Society for Population Economics, vol. 24(1), pages 213-237, January.
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    More about this item

    JEL classification:

    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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