Pollution, Public Health Care, and Life Expectancy when Inequality Matters

Andreas Schaefer () and Alexia Fürnkranz-Prskawetz
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Andreas Schaefer: University of Leipzig

A chapter in Dynamic Optimization in Environmental Economics, 2014, pp 127-154 from Springer

Abstract: Abstract We analyze the link between economic inequality in terms of wealth, life expectancy, health care and pollution. The distribution of wealth is decisive for the number of households investing in human capital. Moreover, the willingness to invest in human capital depends on agents’ life expectancy which determines the length of the amortization period of human capital investments. Life expectancy is positively affected by public health care expenditures but adversely affected by the pollution stock generated by aggregate production. Our model accounts for an endogenous take-off in terms of human capital investments. Higher initial inequality delays the take-off because a given set of policies (abatement measures and public health care) is less effective in improving agents’ survival probabilities. We compare a change in taxes to a change in expenditure shares on health and abatement given different amounts of (initial) inequality. The advantage of the latter as compared to the former is the achieved increase in the tax base which induces more expenditures on health care and abatement measures, such that an even higher economic activity is compatible with a similar level of long-run pollution.

Keywords: Human Capital; Health Expenditure; Public Health Care; Human Capital Investment; Human Capital Accumulation (search for similar items in EconPapers)
Date: 2014
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DOI: 10.1007/978-3-642-54086-8_6

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