Abstract

This paper utilizes the two-period overlapping generations model developed by John and Pecchenino (1994) to examine the impacts of the social security program on environment quality. The main findings are as follows. First, a higher social security benefit leads to a lower environmental quality. Second, the competitive equilibrium is dynamically inefficient in the presence of the consumption externalities. Finally, two kinds of tax scheme, one based on differential environmental taxes and the other based on uniform environmental taxes, are designed to put the economy into the optimal allocation.

 

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