Pollution and life expectancy: How environmental policy can promote growth

Abstract

This article investigates the influence of environmental policy (EP) on growth in an AK-type growth model, when finite lifetime is introduced and the link between pollution and life expectancy (through the detrimental impact of pollution on health) is taken into account.Using an overlapping generations modelà la Blanchard (1985), we demonstrate that finite lifetime introduces a "generational turnover effect" which modifies the influence of the EP on growth. Thus, when lifetime is finite and independent from pollution, we show that the "generational turnover effect" limits the detrimental impact of the EP on growth, if agents smooth their consumption over time. When pollution negatively influences life expectancy through health, we demonstrate that the "generational turnover effect" is magnified and that the relation between the EP and growth is reversed U-shaped in the steady-state. In this case, we show that the environmental policy is more likely to promote growth (i.e. it stimulates growth for a wider range of environmental taxes) when the impact of pollution on health is important and/or public expenditures in health is low. Finally, using numerical simulations, we find that for the value of parameters chosen the EP will be more likely to promote growth when agents smooth consumption over time.

The Great Transition: Implications From Environmental Policy for the Quality–quantity Trade-Off in Children-Rearing

“…Another important channel through which pollution can affect growth and welfare is individuals' life expectancy (see, e.g. Chakraborty, 2004;Gutierrez, 2008;Pautrel, 2008Pautrel, , 2009Varvarigos, 2010). Thus, assuming that the length of individuals's second period of life depends on pollution emissions, appears as a natural extension of our framework.…”

“…The reason is that, in their framework, a better environmental quality leads to an increase of individual productivity in the human capital accumulation sector (e.g. Gradus and Smulders; van Ewijk and van Wijnbergen) or life expectancy (Pautrel, 2008;2009). Thereby, individuals allocate more time to skills acquisition which is growth enhancing.…”

“…On the theoretical side several authors such as Gradus and Smulders (1993), van Ewijk and van Wijnbergen (1994) and Pautrel (2008Pautrel ( , 2009) have therefore developed frameworks accounting for a link between individual human capital and pollution 1 See, for instance, Kunzli (2002) and the World Health Organisation report on Health…”

“…For simplicity, following van Ewijk and van Wijnbergen (1994) and Pautrel (2008Pautrel ( , 2009), Aloi and Tournemaine (2013) among others, we set the technology of human capital as…”

Environmental Policy, Education and Growth with Finite Lifetime: The Role of Abatement Technology

“…They highlighted the importance of assumptions about the influence of pollution on the productivity of education (Gradus and Smulders, 1996;van Ewijk and van Wijnbergen, 1995), about endogenous labor supply (Hettich, 1998), about preferences for schooling (Grimaud and Tournemaine, 2007), about finite lifetime (Pautrel, 2008a) or about the negative impact of pollution on health (Pautrel, 2008b(Pautrel, , 2009), on the outcome of the environmental taxation on long-run human capital accumulation.…”