Environmental Policy and Inequality: A Matter of Life and Death

Karine Constant

No 1527, AMSE Working Papers from Aix-Marseille School of Economics, France

Abstract: This paper analyzes the economic implications of an environmental policy when we take into account the life expectancy of heterogeneous agents. In a framework where everyone suffers from pollution, but health status depends also on individual human capital, we find that the economy may be stuck in a trap where inequalities persistently grow, when the initial level of pollution is too high. Therefore, we study whether a tax on pollution associated with an investment in pollution abatement can be used to reduce inequalities and to improve endogenous growth. We obtain that a tighter environmental policy may allow the economy to escape the inequality trap and hence to converge to a long-term equilibrium without inequality, while it enhances the long-term growth rate. However, if inequalities or pollution are initially too high, such a result does not hold for reasonable tax rates.

Keywords: environmental policy; endogenous growth; human capital; Inequality; longevity (search for similar items in EconPapers)
JEL-codes: I15 O44 Q58 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2015-07-07
New Economics Papers: this item is included in nep-ene, nep-env and nep-res
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Citations: View citations in EconPapers (3)

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Related works:
Working Paper: Environmental policy and inequality: A matter of life and death (2017)
Working Paper: Environmental Policy and Inequality: A Matter of Life and Death (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:aim:wpaimx:1527

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