Pollution, Mortality and Optimal Environmental Policy
Aditya Goenka (),
Saqib Jafarey and
Discussion Papers from Department of Economics, University of Birmingham
We study an overlapping generations economy in which environmental degradation results from economic activity and affects agents' uncertain lifetimes. Life expectancy depends positively on economic activity and negatively on the stock of pollution. This can make the growth-survival relationship convex over some region and lead to two non-trivial steady states, with one is a poverty trap. Uniform abatement taxes can cause the poverty trap to widen while increasing incomes at the high steady state. We also show that the optimal second-best abatement tax is non-homogeneous and increasing in the capital stock, and exhibits a variety of dynamic possibilities: non-existence of a steady state equilibrium, multiplicity of steady state equilibria and optimal policy cycles around some steady states.
Keywords: Overlapping generations model, poverty traps; non-convexities; multiple steady states; pollution; optimal environmental policy; optimal abatement tax (search for similar items in EconPapers)
JEL-codes: O11 O13 O23 O44 (search for similar items in EconPapers)
Pages: 45 pages
New Economics Papers: this item is included in nep-dem, nep-dge and nep-env
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Working Paper: Pollution, Mortality and Optimal Environmental Policy (2014)
Working Paper: Pollution, mortality and optimal environmental policy (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:bir:birmec:12-05
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