Reconsidering the impact of the environment on long-run growth when pollution influences health and agents have a finite-lifetime

Using an overlapping generation model a la Blanchard (1985, J Polit Econ 93:223-247) with human capital accumulation, we demonstrate that the influence of the environment on optimal growth in the long-run may be explained by the detrimental effect of pollution on life expectancy. We also show that, in such a case, greener preferences are growth- and welfare-improving in the long-run even if the ability of the agents to learn is independent of pollution and utility is additively separable. Finally, we establish that a minimum environmental policy is required to obtain a sustainable equilibrium in the market economy and that it is possible to implement a win-win environmental policy.