Pollution, unequal lifetimes and fairness

Grégory Ponthière (1, 2, 3)

1 PSE - Paris-Jourdan Sciences Economiques
2 PSE - Paris School of Economics
3 ERUDITE - Equipe de Recherche sur l’Utilisation des Données Individuelles en lien avec la Théorie Economique

This paper characterizes the optimal level of pollution in a two-period OLG economy where pollution deteriorates survival conditions. We compare two long-run social optima: on the one hand, the average utilitarian optimum, where the long-run average well-being is maximized, and, on the other hand, the ex post egalitarian optimum, where the realized well-being of the worst-off at the stationary equilibrium is maximized. It is shown that the ex post egalitarian optimum involves, under weak conditions, a higher level of pollution in comparison with the utilitarian optimum. This result is robust to introducing health expenditures in the survival function. Finally, we examine the decentralization of those two social optima, and we compare the associated optimal taxes on capital income aimed at internalizing the pollution externality.

Mots clés: pollution

Domaines: Economies et finances

Grégory Ponthière. Pollution, unequal lifetimes and fairness. Mathematical Social Sciences, 2016, 82, pp.49-64. ⟨10.1016/j.mathsocsci.2016.04.004⟩. ⟨halshs-01509676⟩