Pollution Abatement in a Model of Capital Accumulation and Endogenous Longevity

The effort to reduce pollution entails economic benefits because improved environmental quality advances the health status of the population and reduces mortality. Yet, there are also economic costs accruing from this effort because activities towards environmental improvement require resources to be extracted away from capital investment. This paper examines the extent to which pollution abatement policies may, ultimately, increase or decrease income. This is done in the context of a dynamic general equilibrium model, in which the interactions of the dynamics between capital accumulation and environmental quality occur through the flow of pollution generated by economic activity and the beneficial effect of environmental quality on longevity.