This paper introduces health effects in an endogenous growth model with environmental concerns. To highlight the importance of health effects, we examine the time allocation of households in regard to leisure, labor, and health care, which play a crucial role in affecting the impacts of public abatement and emission taxation. We not only show that the health effect modifies the conventional consequences of environmental policy, but also thoroughly compare the effectiveness of these two distinct environmental policies. We also conduct transition and welfare analyses in a dynamic optimizing model which offers novel policy implications, given that the literature on health effects is silent on these issues.
The B.E. Journal of Macroeconomics 15(1), p.223-253