Longevity, pollution and growth

In this paper, we develop an OLG model where both longevity and fertility are endogenous. The authorities provide two types of public expenditures: health services and environmental maintenance that participate to increase agents’ life expectancy. Under proper conditions on the fiscal policy implemented by the government, the global dynamics is featured by multiple equilibria: a high growth rate, associated with longer life expectancy and a reduced fertility, and a poverty-environment trap. On the other hand, if the environmental tax rate is too large, the economy collapses. We also show that an ambitious environmental policy might enhance the growth rate of economy depending on the technological characteristics, for instance the efficiency of cleaning activities. Finally, we are able to draw conclusions on the nature of complementarity between the two policy instruments. JEL classification: I1; O44; Q56;