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(2017) Optimal Taxation,Endogenous Fertility and Emissions-Induced Mortality. Tapio Palokangas, HECER, University of Helsinki.

Abstract.  I examine optimal taxation in an economy where output is produced from labor and capital by technologies that differ in their emission intensity and relative demand for capital and labor. Families save in capital and determine fertility. Emissions increase, but public services (e.g. sanitation, medical care) decreases mortality. Solving the differential game between the social planner and the families leads to the following result. Only if dirty technology is capital intensive relative to clean technology, a wealth tax is optimal. Only if dirty technology is labor intensive enough relative to clean technology, a child-rearing subsidy is optimal. 

  • Paper presented at the International Workshop “Economic Growth, Macroeconomic Dynamics and Agents’ Heterogeneity” in the European University at St Petersburg, May 25-26, 2017.
  • Paper presented in IIASA, Laxenburg/Vienna, Austria, July 25, 2017.