Pollution, Public Health Care, and Life Expectancy When Inequality Matters

We analyze the link between economic inequality in terms of wealth, life expectancy, health care and pollution. The distribution of wealth is decisive for the number of households investing in human capital. Moreover, the willingness to invest in human capital depends on agents' life expectancy which determines the length of the amortization period of human capital investments. Life expectancy is positively affected by public health care expenditures but adversely affected by the pollution stock generated by aggregate production. Our model accounts for an endogenous take-off in terms of human capital investments. Higher initial inequality delays the take-off because a given set of policies (abatement measures and public health care) is less effective in improving agents' survival probabilities. We compare a change in taxes to a change in expenditure shares on health hand abatement given different amounts of (initial) inequality. The advantage of the latter as compared to the former is the achieved increase in the tax base which induces more expenditures on health care and abatement measures, such that an even higher economic activity is compatible with a similar level of long-run pollution

PRIVATE SAVINGS IN TRANSITION ECONOMIES: ARE THERE TERMS OF TRADE SHOCKS?

The paper examines the impact of terms of trade shocks on private savings in the transition economies after accounting for the effect of other determinants. Economic agents in the transition economies are subject to tight credit constraints which are more pronounced during bad state of nature. Thus, adverse shocks to commodity prices in the world market can force them to reduce savings by a larger amount than they would otherwise have. Empirical analysis using a dynamic panel model and data from twenty one transition economies confirm that most of the determinants of savings identified in the literature also apply to the transition economies. Favorable movements in both the permanent and transitory components of the terms of trade have a significant positive impact on private savings with transitory movements having a larger impact than the permanent component. This reflects the lack of access to foreign borrowing that many of the transition economies have faced during the last decade. Although the impact of terms of trade shocks are found to be asymmetric, the magnitude of the impact appears to be small. The results are robust for alternative estimators, determinants, and country groupings.http://deepblue.lib.umich.edu/bitstream/2027.42/39958/3/wp572.pd