Endogenous longevity and the joint dynamics of pollution and capital accumulation

Review Development Economics

Zakaria

2016

Self Cite

Our study examines the effect of environmental factors on the economic decisions regarding fertility. We incorporate health-damaging pollution into a three period overlapping generations model in which life expectancy, fertility and economic growth are all endogenous. We show that environmental factors can cause significant changes to the economy's demographics. In particular, the entrepreneurial choice of less polluting production processes, induced by a tax on emissions, can at some point in time lead to such changes as higher longevity and lower fertility rates. Thus, we provide a novel explanation on the positive relation between fertility rates and pollution. According to this, the causality on this relation may also work from the latter to the former. Furthermore, our model can account for the empirically observed N-shaped correlation between pollution and income per capita.

Section: The Economymentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Longevity, Fertility and Economic Growth: Do Environmental Factors Matter?

Review Development Economics

Zakaria

2016

Self Cite

“…Under different settings, Mariani et al . () and Varvarigos () show that multiple, path‐dependent equilibria in which the high income equilibrium is associated with improved environmental conditions are possible when environmental quality is an important determinant of higher life expectancy. In a separate analysis, Varvarigos () derives conditions under which (environment‐related) structural parameters can determine the emergence of endogenous thresholds and poverty traps in the process of economic development.…”

Section: Introductionmentioning

confidence: 99%

Environmental Dynamics and the Links Between Growth, Volatility and Mortality

2011

Bulletin of Econ Res

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I construct a model of a growing economy with pollution. The analysis of the model shows that the interactions between capital accumulation, endogenous lifetime and environmental quality determine both the long-run growth rate and the pattern of convergence (i.e., monotonic or cyclical) towards the balanced growth path. I argue that such interactions can provide a possible explanatory factor behind the, empirically observed, negative correlation between growth and volatility. Furthermore, the model may capture the observed pattern whereby economic growth and mortality rates appear to be negatively related in the long run, but positively related in the short run.

“…Using a model that accounts for two conflicting health externalities from pollution, Jouvet et al (2010) show that taxes on both income and private health expenditures are necessary to decentralize the social optimum. Mariani et al (2010) show that when environmental quality leads to higher life expectancy, the economy may admit multiple, path-dependent equilibria, whereas Varvarigos (2014) shows that such multiplicity also requires the combination of emission taxes with the endogenous choice of environmental technology by producers. Finally, in Pautrel (2008), the natural environment has an amenity value in addition to its beneficial effect on longevity.…”

Section: Introductionmentioning

confidence: 99%

Pollution Abatement as a Source of Stabilization and Long-Run Growth

Palivos

2016

Macroecon. Dynam.

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In a two-period overlapping-generations model with production, we consider the damaging impact of environmental degradation on health and consequently life expectancy. Despite the presence of social constant returns to capital, which would otherwise generate unbounded growth, when pollution is left unabated, the economy cannot achieve such a path. Instead, it converges either to a stationary level of capital per worker or to a cycle in which capital per worker oscillates permanently. The government's involvement in environmental preservation proves crucial for both short-term dynamics and long-term prospects of the economy. Particularly, an active policy of pollution abatement emerges as an important engine of long-run economic growth. Furthermore, by eliminating the occurrence of limit cycles, pollution abatement is also a powerful source of stabilization.