CCED工作论文系列 No.20120704
CCED Working Paper Series
Health Risk, Precautionary Saving,
and the Pollution-Growth Nexus
Min Wang
Abstract
In this paper, we show how policies aimed at improving health and those intended to improve the environment are (and should be) deeply intertwined. In the model economy inspired by recent Chinese experience, agents self insure anticipating future medical expenses necessitated by heightened risk of pollution-induced poor health. The increased saving leads to more capital accumulation, and more capital use by firms to more pollution. Such a pollution-growth nexus may be attractive along the growth dimension; however, rising pollution, via the health channel, definitely hurts welfare. A set of policy instruments – availability of private health insurance to top-up pay-as-you-go coverage of medical bills along with a Pigouvian tax on emissions –can replicate the first best.
Health Risk, Precautionary Saving, and the Pollution-Growth Nexus.pdf
