The morbidity costs of air pollution through the Lens of Health Spending in China

• Published in: Journal of population economics Vol. 36; no. 3; pp. 1269 - 1292
• Main Authors: Zhang, Xin, Zhang, Xun, Liu, Yuehua, Zhao, Xintong, Chen, Xi
• Format: Journal Article
• Language: English
• Published: Berlin/Heidelberg Springer Berlin Heidelberg 01.07.2023; Springer Nature B.V
• Subjects: Air pollution; Costs; Demography; Developing countries; Economics; Economics and Finance; Estimates; Expenditures; Health care; Health care expenditures; Health care facilities; Health insurance; Individual differences; Labor Economics; LDCs; Lower bounds; Males; Middle age; Morbidity; Older people; Original Paper; Particulate matter; Particulates; Pharmacies; Pharmacy; Population Economics; Reduction; Social Policy; Transactions; Willingness to pay; China; Health spending; China; I31; I11; Air quality; Q51; Willingness to pay; Q53
• ISSN: 0933-1433; 1432-1475
• DOI: 10.1007/s00148-023-00948-y

This study is one of the first to present causal evidence of the morbidity costs of fine particulates (PM2.5) for all age cohorts in a developing country, using individual-level health spending data from a basic medical insurance program in Wuhan, China. Our instrumental variable (IV) approach uses thermal inversion to address potential endogeneity in PM2.5 concentrations and shows that PM2.5 imposes a significant impact on healthcare expenditures. The two-stage least squares (2SLS) estimates suggest that a 10 μg/m 3 (micrograms per cubic meter) reduction in monthly average PM2.5 leads to a 2.36% decrease in the value of health spending and a 0.79% decline in the number of transactions at pharmacies and healthcare facilities. Also, this effect, largely driven by spending at pharmacies, is more salient for males and children, as well as middle-aged and older adults. Moreover, our estimates may provide a lower bound on individuals’ willingness to pay, amounting to CNY 43.87 (or USD 7.09) per capita per year for a 10 μg/m 3 reduction in PM2.5.