Pollution effects on disease transmission and economic stability

Stefano Bosi () and David Desmarchelier
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Stefano Bosi: EPEE - Centre d'Etudes des Politiques Economiques - UEVE - Université d'Évry-Val-d'Essonne - Université Paris-Saclay

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Abstract: In this article, we embed a model of disease spread into a Ramsey model. A stock of pollution, viewed as a productive externality, affects both the disease transmission and the consumption demand. An eco-friendly government levies a proportional Pigouvian tax on production to depollute. We show the coexistence of two steady states in the long run: a disease-free and an endemic steady state. At the endemic steady state, a higher green-tax rate always reduces the pollution level. In the short run, we show the existence of limit cycles (through a Hopf bifurcation) as well as more complex dynamics of codimension two (a Gavrilov-Guckenheimer bifurcation). We complete the study with a numerical illustration of these bifurcations and a new facet of the Green Paradox: a higher tax rate can allow more scope for cycles by lowering the critical aversion to pollution and, thus, contribute to destabilization of the economy and promotion of the intergenerational inequalities.

Keywords: SIS model; Ramsey model; Pollution; Transcritical bifurcation; Hopf bifurcation; Gavrilov-Guckenheimer bifurcation (search for similar items in EconPapers)
Date: 2021-06
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Citations: View citations in EconPapers (1)

Published in International Journal of Economic Theory, 2021, 17 (2), pp.169-189. ⟨10.1111/ijet.12213⟩

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Journal Article: Pollution effects on disease transmission and economic stability (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03279310

DOI: 10.1111/ijet.12213

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