Growth effects of environmental policy when pollution affects health
In this paper, we develop a R&D-based growth model with a pollution externality and a health production sector. We study how health-impairing pollution affects long term growth, and the effect of an emissions' reduction policy (tax). We show that a tighter environmental tax has positive effects on growth via two channels. On the one hand, it improves workers' health and, thereby, productivity; on the other hand, it induces a reallocation of resources towards R&D and, thereby, higher research intensity. The size of the growth effect of a tighter environmental tax, and the level of the optimal environmental tax, are both positively correlated with the weight individuals place on health relative to consumption. As for welfare, a tighter environmental tax brings about utility gains in the long run and, potentially, also in the short run.
Year of publication: |
2011
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Authors: | Aloi, Marta ; Tournemaine, Frederic |
Published in: |
Economic Modelling. - Elsevier, ISSN 0264-9993. - Vol. 28.2011, 4, p. 1683-1695
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Publisher: |
Elsevier |
Subject: | Environmental policy Growth Health Pollution |
Saved in:
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