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Optimal Health and Environmental Policies in a Pollution-Growth Nexus

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  • Wang, Min
  • Zhao, Jinhua
  • Bhattacharya, Joydeep

Abstract

This paper shows how policies aimed at insuring health risks and those intended to improve the environment are (and should be) deeply intertwined. In the model economy, inspired by recent Chinese experience, pollution raises the likelihood of poor health in the future prompting agents to self insure against anticipated, rising medical expenses. The increased saving generates more capital while capital use by firms generates more pollution. Along the transition, sucha pollution-growth nexus may be attractive from a capital-accumulation perspective; however, rising pollution, via the health channel, definitely hurts welfare. Availability of private health insurance to top up pay-as-you-go coverage of medical bills together with a Pigouvian tax on emissions can replicate the first best.

Suggested Citation

  • Wang, Min & Zhao, Jinhua & Bhattacharya, Joydeep, 2013. "Optimal Health and Environmental Policies in a Pollution-Growth Nexus," Staff General Research Papers Archive 35994, Iowa State University, Department of Economics.
  • Handle: RePEc:isu:genres:35994
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    File URL: http://www2.econ.iastate.edu/papers/p15994-2013-03-08.pdf
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    References listed on IDEAS

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    Cited by:

    1. Nguyen Thang Dao & Kerstin Burghaus & Ottmar Edenhofer, 2017. "Self-Enforcing Intergenerational Social Contracts for Pareto Improving Pollution Mitigation," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 68(1), pages 129-173, September.
    2. Xavier Pautrel, 2018. "Environmental Policy and Health in the Presence of Labor Market Imperfections," TEPP Working Paper 2018-09, TEPP.
    3. Dao, Nguyen Thang & Edenhofer, Ottmar, 2018. "On the fiscal strategies of escaping poverty-environment traps towards sustainable growth," Journal of Macroeconomics, Elsevier, vol. 55(C), pages 253-273.
    4. Natacha Raffin & Thomas Seegmuller, 2017. "The Cost of Pollution on Longevity, Welfare and Economic Stability," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 68(3), pages 683-704, November.
    5. Wei-Bin Zhang, 2015. "Oscillations in a Growth Model with Capital, Technology and Environment with Exogenous Shocks," Academicus International Scientific Journal, Entrepreneurship Training Center Albania, issue 12, pages 73-93, July.
    6. Torben M. Andersen & Joydeep Bhattacharya & Pan Liu, 2016. "Resolving Intergenerational Conflict over the Environment under the Pareto Criterion," CESifo Working Paper Series 6053, CESifo Group Munich.
    7. Lucas Bretschger & Alexandra Vinogradova, 2017. "Human Development at Risk: Economic Growth with Pollution-Induced Health Shocks," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 66(3), pages 481-495, March.

    More about this item

    Keywords

    pollution; health; overlapping generations model; saving;

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products

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