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Environmental taxation, health and the life-cycle

Author

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  • Nathalie Mathieu-Bolh

    (University of Vermont [Burlington])

  • Xavier Pautrel

    (LEMNA - Laboratoire d'économie et de management de Nantes Atlantique - IEMN-IAE Nantes - Institut d'Économie et de Management de Nantes - Institut d'Administration des Entreprises - Nantes - UN - Université de Nantes - IUML - FR 3473 Institut universitaire Mer et Littoral - UM - Le Mans Université - UA - Université d'Angers - UN - Université de Nantes - ECN - École Centrale de Nantes - UBS - Université de Bretagne Sud - IFREMER - Institut Français de Recherche pour l'Exploitation de la Mer - CNRS - Centre National de la Recherche Scientifique - ONIRIS - École nationale vétérinaire, agroalimentaire et de l'alimentation Nantes-Atlantique - IMT Atlantique - IMT Atlantique - IMT - Institut Mines-Télécom [Paris])

Abstract

We build a model that takes into consideration the evolution of health over the life cycle and its consequences on individual optimal choices. In this framework, the effect of environmental taxation are not limited to the traditional negative crowding-out and positive productivity effects. We show that environmental taxation generates new general equilibrium effects ignored by previous contributions. Indeed, as the environmental tax improves the health profile over the life-cycle, it influences saving, labor supply, retirement and investment in health. We also show that whether those general equilibrium effects are positive or negative for the economy crucially depends on the degree of substitutability between young and old labor. We complete our theoretical analysis with numerical examples. Within the range of our parameters, it appears that ignoring those general equilibrium effects results in significantly understating the negative of environmental tax- ation on output per capita and welfare.

Suggested Citation

  • Nathalie Mathieu-Bolh & Xavier Pautrel, 2014. "Environmental taxation, health and the life-cycle," Working Papers hal-00930936, HAL.
  • Handle: RePEc:hal:wpaper:hal-00930936
    Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-00930936
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    Health; environmental policy; economic growth;
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