Abstract
This paper develops a two-period overlapping-generations model with environmental externalities and uncertain lifetimes, and studies how two sources of population aging, greater longevity and a lower rate of population growth, affect the politically determined environmental tax and the quality of the environment. It is shown that greater longevity and a lower rate of population growth have entirely different effects on these factors; greater longevity has no effect on the environmental tax and has a non-positive effect on the environmental quality, whereas a lower rate of population growth has a negative effect on the tax and has a positive effect on the quality. In addition, the political decision-making on the tax leads to an inefficient allocation of capital and environmental quality.
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JEL classifications: D72, D78, D91, H41, O40, Q20, Q28
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Ono, T. The Political Economy of Environmental Taxes with an Aging Population. Environ Resource Econ 30, 165–194 (2005). https://doi.org/10.1007/s10640-004-1517-0
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DOI: https://doi.org/10.1007/s10640-004-1517-0