Pollution and growth: The role of pension in the efficiency of health and environmental policies. (18th December 2019)

• Record Type: Journal Article
• Authors: Ngami, Armel; Seegmuller, Thomas
• Is Part Of: International journal of economic theory. Volume 17:Number 4(2021)
• Page Start: 390
• Page End: 415
• Publication Date: 2019-12-18
• Subjects: endogenous growth -- environment -- health -- longevity -- pension system -- pollution; Economics -- Periodicals; 330.01
• DOI: 10.1111/ijet.12247
• Languages: English
• ISSNs: 1742-7355

Abstract

Abstract: This paper analyzes the effect of a pay‐as‐you‐go pension system on the evolution of capital and pollution, and on the efficiency of an environmental versus health policy. In an overlapping generations model, we introduce endogenous longevity that depends on pollution and health expenditures. Global dynamics may display multiple balanced growth paths (BGPs). We show that by discouraging savings, a policy that promotes the pension system enlarges the environmental poverty trap. More surprisingly, the environmental policy has contrasting effects according to the significance of the pension system. If it has a small size, a more environmentally‐friendly policy enlarges the environmental poverty trap and leads to a rise in capital over pollution at the highest stationary equilibrium. In contrast, in economies where intergenerational solidarity is well developed, capital over pollution decreases at the highest BGP. In such a case, the environmental policy does not necessarily lead to a better longevity and growth.