Working Paper, Konjunkturinstitutet - National Institute of Economic Research
No 82:
Green Accounting, Air Pollution and Health
Anni Huhtala and Eva Samakovlis ()
Abstract: Human capital is an important component of economic
growth. The article extends a theoretical model for comprehensive national
accounting to the welfare effects of pollution on human capital. The model
includes a production externality in the form of a flow of air pollutants
that cause both direct disutility and indirect welfare effects by
negatively affecting the productivity of labor. We show that defensive
medical expenditures or healthcare costs allocated to mitigating the
disutility of air pollution should not be deducted from conventional net
national product (NNP), whereas the value of the percieved disutility of
illness episodes caused by pollution should be subtracted from NNP. We
derive a marginal cost-benefit rule for an optimal level of pollution given
its negative health effects. The rule can be used for determining an
optimal tax on harmful emissions. Finally, we outline a scheme for
empirical comprehensive accounting and for estimation of an emissions
tax.
32 pages, May 14, 2003
This paper is published as: Huhtala,A. and E. Samakovlis (2007), "Flows of Air Pollution, Ill Health and Welfare", Environmental and Resource Economics, 37 (2)
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