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Environmental taxation, health and the life-cycle

Author

Listed:
  • 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)

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 effects 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, and retirement. 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. Our numerical examples suggest that ignoring those new effects may result in large overstatement of the negative effect of an increase in environmental taxation on output, and understatement of the positive effect on welfare. ∗

Suggested Citation

  • Nathalie Mathieu-Bolh & Xavier Pautrel, 2014. "Environmental taxation, health and the life-cycle," Working Papers hal-00990256, HAL.
  • Handle: RePEc:hal:wpaper:hal-00990256
    Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-00990256
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    Keywords

    Health; environmental policy; economic growth;

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