Abstract
I construct a two-period overlapping generations model in which longevity is positively affected by public spending on health services and negatively affected by pollution. It is shown that the parameters which determine the extent of environmental degradation (i.e., emission rate and pollution abatement) may also represent additional factors affecting the dynamics of the economy, the likelihood of multiple (non-trivial) steady-state equilibria and the emergence of poverty traps. The distribution of public spending between public health care and pollution abatement that maximizes equilibrium income is also derived. This distribution of spending minimizes the threshold which the economy needs to surpass in order to avoid a poverty trap while, under certain circumstances, it can maximize equilibrium welfare as well.
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I would like to thank two anonymous referees and an associate editor of this journal, for useful comments and suggestions on earlier drafts. Any errors are solely my responsibility.
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Varvarigos, D. Environmental Degradation, Longevity, and the Dynamics of Economic Development. Environ Resource Econ 46, 59–73 (2010). https://doi.org/10.1007/s10640-009-9334-0
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DOI: https://doi.org/10.1007/s10640-009-9334-0