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Pollution, mortality and optimal environmental policy

Aditya Goenka (), S. Jafarey and William Pouliot

Working Papers from Department of Economics, City University London

Abstract: 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 a poverty trap. Uniform abatement taxes can cause the poverty trap to widen while increasing incomes at the high steady state. We also study the properties and dynamics of an optimal second-best abatement tax. It is non-homogeneous and increasing in the capital stock, and leads to a variety of dynamic possibilities, including non-existence and multiplicity of steady states, and cycles around some of the steady states, where there were none under exogenous taxes. Thus, optimal taxes can be an independent source of non-linearities.

Keywords: Overlapping generations model; poverty traps; non-convexities; multiple steady states; pollution; optimal environmental policy; optimal abatement tax (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dem, nep-dge, nep-ene, nep-env and nep-pbe
Date: 2012
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http://openaccess.city.ac.uk/id/eprint/1734/1/jafarey.pdf

Related works:
Working Paper: Pollution, Mortality and Optimal Environmental Policy (2014) Downloads
Working Paper: Pollution, Mortality and Optimal Environmental Policy (2012) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:cty:dpaper:12/07

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