Environmental Taxation, Health, and the Life-Cycle

39 Pages Posted: 31 May 2014

See all articles by Nathalie Mathieu-Bolh

Nathalie Mathieu-Bolh

University of Vermont, Economics Department

Xavier Pautrel

Université d'Angers (France), GRANEM - TEPP

Date Written: May 2, 2014

Abstract

We build a model that takes into consideration the evolution of health over the life cycle and its consequences on individual optimal choices. In this framework, the effects of environmental taxation are not limited to the traditional negative crowding-out and positive productivity effects. We show that environmental taxation generates new general equilibrium effects ignored by previous contributions. Indeed, as the environmental tax improves the health profile over the life-cycle, it influences saving, labor supply, and retirement. We also show that whether those general equilibrium effects are positive or negative for the economy crucially depends on the degree of substitutability between young and old labor. Our numerical examples suggest that ignoring those new effects may result in large overstatement of the negative effect of an increase in environmental taxation on output, and understatement of the positive effect on welfare.

Keywords: Environmental taxation, health, life-cycle

Suggested Citation

Mathieu-Bolh, Nathalie and Pautrel, Xavier, Environmental Taxation, Health, and the Life-Cycle (May 2, 2014). Available at SSRN: https://ssrn.com/abstract=2443374 or http://dx.doi.org/10.2139/ssrn.2443374

Nathalie Mathieu-Bolh (Contact Author)

University of Vermont, Economics Department ( email )

United States
8026560946 (Phone)

Xavier Pautrel

Université d'Angers (France), GRANEM - TEPP ( email )

France

HOME PAGE: http://xavier.pautrel.free.fr/xpautrel.html

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