Title

Optimal health and environmental policies in a pollution-growth nexus

Campus Units

Economics

Document Type

Article

Publication Version

Submitted Manuscript

Publication Date

5-2015

Journal or Book Title

Journal of Environmental Economics and Management

Volume

71

First Page or Article ID Number

160

Last Page

179

DOI

10.1016/j.jeem.2015.02.006

Abstract

This paper shows how policies aimed at insuring health risks and those intended to improve the environment are (and should be) deeply intertwined. In the model economy inspired by recent Chinese experience, pollution raises the likelihood of future, poor health prompting households to save more so as to self-insure against anticipated medical expenses. Increased household saving generates more capital while capital use by firms generates more pollution. Along the transition, such a “pollution-growth nexus” may be attractive from a capital-accumulation perspective; however, rising pollution, via the health channel, hurts welfare. Both insurance and environmental policies affect capital accumulation and can have additional dynamic benefits. The availability of private health insurance to top up pay-as-you-go coverage of medical bills along with a Pigouvian tax on emissions and a profit tax can replicate the first best.

JEL Classification

E02, O13

Comments

This article is published as Optimal Health and Environmental Policies in a Pollution-Growth Nexus (with Min Wang and Jinhua Zhao), 2015, Journal of Environmental Economics and Management, 71, 160–179; DOI: 10.1016/j.jeem.2015.02.006. Posted with permission.

Copyright Owner

Elsevier Inc.

Language

en

File Format

application/pdf

Published Version Working Paper

Share

COinS