Air pollution impacts on health care expenditure in China: evidence and mechanisms

This paper studies the causal effects of air pollution on individual-level health care expenditure in China. We employ a nationally-representative panel dataset of the China Health and Nutrition Survey from 1991 to 2015 to estimate the impacts of air pollution on various types of health care expenditures. Using thermal inversions as an instrumental variable for air pollution, we fnd that exposure to air pollution in the past year (12 months) leads to an increase in total health care expenditure and health care utilization. In particular, with a 1 µg/m3 increase in average PM2.5 concentrations, total health care spending would rise by 5.1% and the probability of health care utilization would rise by 0.98% point. The increases are mainly driven by changes in hospital care and preventive care costs. Our mechanism evidence suggests that air pollution might affect health care expenditure by increasing weight and the probability of getting sick while reducing sleep time and the chances of walking to work.