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

Author

Listed:
  • Xin Zhang

    (Beijing Normal University)

  • Xun Zhang

    (Beijing Normal University)

  • Yuehua Liu

    (Tsinghua University
    Institute for Health China, Tsinghua University)

  • Xintong Zhao

    (Renmin University of China)

  • Xi Chen

    (Yale School of Public Health
    Yale University)

Abstract

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/m3 (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/m3 reduction in PM2.5.

Suggested Citation

  • Xin Zhang & Xun Zhang & Yuehua Liu & Xintong Zhao & Xi Chen, 2023. "The morbidity costs of air pollution through the Lens of Health Spending in China," Journal of Population Economics, Springer;European Society for Population Economics, vol. 36(3), pages 1269-1292, July.
    • Handle: RePEc:spr:jopoec:v:36:y:2023:i:3:d:10.1007_s00148-023-00948-y
    DOI: 10.1007/s00148-023-00948-y
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    More about this item

    Keywords

    Air quality; Health spending; Willingness to pay; China;
    All these keywords.

    JEL classification:

    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being

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