Air pollution causes health effects and net national product of a country decreases: a theoretical framework

The paper deals with green accounting and accounts the health effects of air pollution. It shows that due to air pollution human capital can not be utilized properly and net national product of a country decreases. The willing to pay system among workers is beneficial to the government, factory owners and workers of a country. The marginal cost-benefit rule for an optimal level of air pollution creates negative health effects. The air pollution cause both direct disutility and indirect welfare effects by negatively affecting the productivity of labor. The paper also deals the health benefits from reduced pollution may sufficiently affect labor supply to create benefit-side tax interactions which, in turn, may be of the same magnitude as cost-side ones.