Macroeconomic Implications of Demography for the Environment: A Life-Cycle Perspective

Xavier Pautrel

No 50325, Sustainable Development Papers from Fondazione Eni Enrico Mattei (FEEM)

Abstract: This article studies how demography affects the outcome of the environmental policy in a macro-economic perspective, incorporating age-earning profiles in an OLG model à la Blanchard (1985) to capture the age structure effect of the demographic shocks. It first demonstrates, conversely to previous works of the related literature that a decrease in the birth rate may lower the steady-state per capita stock of physical capital even if the aggregate labor supply is exogenous. It also demonstrates that the ageing of population influences the macro-economic impact of the environmental policy according to the cause of the ageing and the life-cycle earnings assumption. Thus, with decreasing age-earning profiles, a lower birth rate reduces the detrimental impact of the environmental policy on the steady-state per capita stock of physical capital for low values of this birth rate, while a reduction of the mortality rate reinforces the negative outcome of the environmental policy. When earnings profiles are independent of age, ageing always strengthens the negative impact of the environmental policy.

Keywords: Environmental; Economics; and; Policy (search for similar items in EconPapers)
Pages: 24
Date: 2009
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Persistent link: https://EconPapers.repec.org/RePEc:ags:feemdp:50325

DOI: 10.22004/ag.econ.50325

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