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Pollution effects on labor supply and growth
Author(s) -
Bosi Stefano,
Desmarchelier David,
Ragot Lionel
Publication year - 2015
Publication title -
international journal of economic theory
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.351
H-Index - 11
eISSN - 1742-7363
pISSN - 1742-7355
DOI - 10.1111/ijet.12071
Subject(s) - economics , pollution , uniqueness , volatility (finance) , labour supply , supply and demand , term (time) , consumption (sociology) , microeconomics , natural resource economics , labour economics , econometrics , mathematics , mathematical analysis , ecology , biology , social science , physics , quantum mechanics , sociology
Abstract Recent empirical contributions have observed a significant negative impact of pollution on labor supply. These impacts have been largely ignored in the theoretical literature, which has focused on the effects of pollution on consumption demand. In this paper we study the short‐ and long‐run effects of pollution in a Ramsey model where pollution and labor supply are non‐separable arguments in households’ preferences. We determine sufficient conditions for the existence and uniqueness of a long‐term equilibrium and we show how large (negative) effects of pollution on labor supply may promote macroeconomic volatility (deterministic cycles near the steady state) through a flip bifurcation.