Economic impacts of environmental pollution control: Application of a general equilibrium model to Hungary

Date of Completion

January 1992


Economics, General|Environmental Sciences




This dissertation provides a methodological and empirical study of the impacts of air quality regulation by incorporating the effects of health benefits into the analysis. The applied general equilibrium approach allows to trace the spillover effects of imposed environmental regulation. The general equilibrium model that is developed uses the recourse cost approach to introduce the health benefits of improved air quality. The effect of improved air quality is measured by lower medical costs and wage loss during periods of illness. Air quality is measured by emissions of SO$\sb{\rm x},$ NO$\sb{\rm x}$ and particulate matters. An environmental policy goal is given by an upper limit on acceptable emissions from particulates.^ The model is a multisectoral static model of an open economy. The structure of production side follows the tradition of Johansen's input-output approach and is based on extensions introduced by Bergman. The consumption side of the economy is represented by a single household sector. The model closure is given by the balanced government budget. The used functional forms are the nested Constant Elasticity of Substitution (CES) function for production and Cobb-Douglas (C-D) sort utility function for consumption.^ The model for evaluating the impacts of air quality regulation with incorporated health benefits was applied to a Central-European country, Hungary. The basic model parameters were obtained from a single Input-Output table for 1988 using the calibration method. Substitution elasticities of inputs and export price elasticities were adopted from literature surveys. The model was simulated under two assumptions regarding regulation intensity. Simulation results were used to determine the possible effects of incorporating the health benefits into the analysis of air quality regulation. ^