Covid-19 and a Green Recovery?

Aditya Goenka, Lin Liu et Manh-Hung Nguyen


Preliminary evidence indicates that pollution increases the severity and likelihood of COVID-19 infections similar to many other infectious diseases. This paper models the inter-action of pollution and disease preventive actions, either pharmaceutical or non-pharmaceutical interventions, on transmission of infectious diseases in a neoclassical growth framework. There are two externalities – households do not take into account how their actions affect disease transmission, and productive activity results in pollution which increases the likelihood of in-fections. The disease dynamics are modeled to be of SIS type. We study the difference in health and economic outcomes between the decentralized economy, where households do not internalize externalities, and socially optimal outcomes, and characterize the taxes and subsi-dies that decentralize the latter. Thus, we examine the question whether there are sufficient incentives to reduce pollution, at both private and public levels, once its effects on disease transmission is considered. In competitive outcomes, pollution increases with increased pro-ductivity. The socially efficient outcome has higher pollution than a competitive outcome, despite increase in abatement, as the effect of higher productivity and larger labor supply dom-inates. The results question the hopes of a Green Recovery.


Covid-19; pollution: environmental policy; infectious disease; Green Recovery; dynamic Pigovian taxes;

Codes JEL

  • I15: Health and Economic Development
  • Q53: Air Pollution • Water Pollution • Noise • Hazardous Waste • Solid Waste • Recycling
  • H23: Externalities • Redistributive Effects • Environmental Taxes and Subsidies
  • E22: Capital • Investment • Capacity
  • C61: Optimization Techniques • Programming Models • Dynamic Analysis


Aditya Goenka, Lin Liu et Manh-Hung Nguyen, « Covid-19 and a Green Recovery? », TSE Working Paper, n° 20-1163, novembre 2020, révision juin 2021.


Aditya Goenka, Lin Liu et Manh-Hung Nguyen, « Covid-19 and a Green Recovery? », Economic Modelling, 2021, à paraître.

Publié dans

Economic Modelling, 2021, à paraître