Environmental Governance, Public Health Expenditure, and Economic Growth: Analysis in an OLG Model

Abstract

This article studies the relationship between environmental governance, public health expenditure, and economic growth by introducing human health status into a three-period overlapping generation dynamic general equilibrium (OLG-DGE) model and conducting a policy simulation analysis in a Chinese scenario. The main findings are generalized as follows: (i) The increase in pollution emissions per unit of output will not only lead to the deterioration of public health but also hinder long-term economic growth, while the efficiency of pollution control will improve health and output per labor unit; (ii) Although levying environmental tax will improve health status and life expectancy, it has a non-linear impact on pollution emissions and output per labor unit, which means that there are trade-offs among environmental governance, public health improvement, and economic output; and (iii) Although the increase in the proportion of public health expenditure will improve health status, its impact on life expectancy and economic output is affected by the level of environmental tax. Only when the environmental tax rate is relatively low, will increasing the proportion of public health expenditure extend life expectancy and output per labor unit.