Optimal Pollution and Optimal Population

There is emerging evidence that environmental degradation increases human mortality. This paper provides a long-run consumer maximization model where population growth is endogenous to emissions that are generated in production. There is a trade-off between consumption and population growth; large consumption calls for large production, thus leading to high environmental mortality and low population growth. It may be optimal to end up with negative population growth implying that demographic sustainability fails as consumption increases excessively. We provide a theoretical model and suggest its calibrated version using European air pollution data. Our exercise illustrates the functioning of the theoretical model and discusses related methodological problems.
Journal of Economic Literature: Q01, Q53, Q54, J11
KEYWORDS: Optimal growth; Optimal pollution; Sustainable development; Calibrations; Europe

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