Pollution, premature death and compensation.

Summary We study the compensation of prematurely dead people in an economy where production generates pollution, and where pollution reduces, beyond a certain threshold, the chances of survival. To do so, we characterize the ex post egalitarian optimum and compare it to the laissez-faire equilibrium and the utilitarian optimum. When the pollution threshold above which premature mortality occurs is high, the ex-post egalitarian optimum requires a pollution level equal to this threshold, and lower than those prevailing in the laissez-faire and the utilitarian optimum. But when the critical pollution threshold is low, the pollution level associated with the ex-post egalitarian optimum is equal to that prevailing in the laissez-faire equilibrium, and higher than that associated with the utilitarian optimum.