IDEAS home Printed from https://ideas.repec.org/p/iza/izadps/dp15839.html
   My bibliography  Save this paper

The Morbidity Costs of Air Pollution through the Lens of Health Spending in China

Author

Listed:
  • Zhang, Xin

    (Beijing Normal University)

  • Zhang, Xun

    (Beijing Normal University)

  • Liu, Yuehua

    (Tsinghua University)

  • Zhao, Xintong

    (Renmin University of China)

  • Chen, Xi

    (Yale University)

Abstract

This study is one of the first investigating the 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 2SLS estimates suggest that a 10 μg/m3 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 in pharmacies and healthcare facilities. Also, this effect, largely driven by the increased spending in pharmacies, is more salient for males and children, as well as middle-aged and older adults. Moreover, our estimates may provide a lower bound to 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

  • Zhang, Xin & Zhang, Xun & Liu, Yuehua & Zhao, Xintong & Chen, Xi, 2022. "The Morbidity Costs of Air Pollution through the Lens of Health Spending in China," IZA Discussion Papers 15839, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp15839
    as

    Download full text from publisher

    File URL: https://docs.iza.org/dp15839.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Michael Greenstone & Rema Hanna, 2014. "Environmental Regulations, Air and Water Pollution, and Infant Mortality in India," American Economic Review, American Economic Association, vol. 104(10), pages 3038-3072, October.
    2. Tatyana Deryugina & Garth Heutel & Nolan H. Miller & David Molitor & Julian Reif, 2019. "The Mortality and Medical Costs of Air Pollution: Evidence from Changes in Wind Direction," American Economic Review, American Economic Association, vol. 109(12), pages 4178-4219, December.
    3. Eva Arceo & Rema Hanna & Paulina Oliva, 2016. "Does the Effect of Pollution on Infant Mortality Differ Between Developing and Developed Countries? Evidence from Mexico City," Economic Journal, Royal Economic Society, vol. 126(591), pages 257-280, March.
    4. Koichiro Ito & Shuang Zhang, 2020. "Willingness to Pay for Clean Air: Evidence from Air Purifier Markets in China," Journal of Political Economy, University of Chicago Press, vol. 128(5), pages 1627-1672.
    5. Zhang, Xin & Zhang, Xiaobo & Chen, Xi, 2017. "Valuing Air Quality Using Happiness Data: The Case of China," Ecological Economics, Elsevier, vol. 137(C), pages 29-36.
    6. Yu, Hao, 2015. "Universal health insurance coverage for 1.3 billion people: What accounts for China's success?," Health Policy, Elsevier, vol. 119(9), pages 1145-1152.
    7. Levinson, Arik, 2012. "Valuing public goods using happiness data: The case of air quality," Journal of Public Economics, Elsevier, vol. 96(9-10), pages 869-880.
    8. Kenneth Y. Chay & Michael Greenstone, 2003. "The Impact of Air Pollution on Infant Mortality: Evidence from Geographic Variation in Pollution Shocks Induced by a Recession," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(3), pages 1121-1167.
    9. Matthew Neidell, 2009. "Information, Avoidance Behavior, and Health: The Effect of Ozone on Asthma Hospitalizations," Journal of Human Resources, University of Wisconsin Press, vol. 44(2).
    10. Kenneth Y. Chay & Michael Greenstone, 2005. "Does Air Quality Matter? Evidence from the Housing Market," Journal of Political Economy, University of Chicago Press, vol. 113(2), pages 376-424, April.
    11. A. Colin Cameron & Jonah B. Gelbach & Douglas L. Miller, 2008. "Bootstrap-Based Improvements for Inference with Clustered Errors," The Review of Economics and Statistics, MIT Press, vol. 90(3), pages 414-427, August.
    12. David Roodman & James G. MacKinnon & Morten Ørregaard Nielsen & Matthew D. Webb, 2019. "Fast and wild: Bootstrap inference in Stata using boottest," Stata Journal, StataCorp LP, vol. 19(1), pages 4-60, March.
    13. Welsch, Heinz, 2006. "Environment and happiness: Valuation of air pollution using life satisfaction data," Ecological Economics, Elsevier, vol. 58(4), pages 801-813, July.
    14. He, Guojun & Fan, Maoyong & Zhou, Maigeng, 2016. "The effect of air pollution on mortality in China: Evidence from the 2008 Beijing Olympic Games," Journal of Environmental Economics and Management, Elsevier, vol. 79(C), pages 18-39.
    15. Currie, Janet & Neidell, Matthew & Schmieder, Johannes F., 2009. "Air pollution and infant health: Lessons from New Jersey," Journal of Health Economics, Elsevier, vol. 28(3), pages 688-703, May.
    16. Chen Yuyu & Jin Ginger Zhe & Kumar Naresh & Shi Guang, 2012. "Gaming in Air Pollution Data? Lessons from China," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 13(3), pages 1-43, December.
    17. Zhang, Junjie & Mu, Quan, 2018. "Air pollution and defensive expenditures: Evidence from particulate-filtering facemasks," Journal of Environmental Economics and Management, Elsevier, vol. 92(C), pages 517-536.
    18. Sun, Chuanwang & Yuan, Xiang & Yao, Xin, 2016. "Social acceptance towards the air pollution in China: Evidence from public's willingness to pay for smog mitigation," Energy Policy, Elsevier, vol. 92(C), pages 313-324.
    19. Smith, V Kerry & Huang, Ju-Chin, 1995. "Can Markets Value Air Quality? A Meta-analysis of Hedonic Property Value Models," Journal of Political Economy, University of Chicago Press, vol. 103(1), pages 209-227, February.
    20. Sun, Cong & Kahn, Matthew E. & Zheng, Siqi, 2017. "Self-protection investment exacerbates air pollution exposure inequality in urban China," Ecological Economics, Elsevier, vol. 131(C), pages 468-474.
    21. Enrico Moretti & Matthew Neidell, 2011. "Pollution, Health, and Avoidance Behavior: Evidence from the Ports of Los Angeles," Journal of Human Resources, University of Wisconsin Press, vol. 46(1), pages 154-175.
    22. Zhang, Xin & Zhang, Xiaobo & Chen, Xi, 2017. "Happiness in the air: How does a dirty sky affect mental health and subjective well-being?," Journal of Environmental Economics and Management, Elsevier, vol. 85(C), pages 81-94.
    23. Liao, Liping & Du, Minzhe & Chen, Zhongfei, 2021. "Air pollution, health care use and medical costs: Evidence from China," Energy Economics, Elsevier, vol. 95(C).
    24. Olivier Deschênes & Michael Greenstone & Joseph S. Shapiro, 2017. "Defensive Investments and the Demand for Air Quality: Evidence from the NOx Budget Program," American Economic Review, American Economic Association, vol. 107(10), pages 2958-2989, October.
    25. Janet Currie & Matthew Neidell, 2005. "Air Pollution and Infant Health: What Can We Learn from California's Recent Experience?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 120(3), pages 1003-1030.
    26. Bayer, Patrick & Keohane, Nathaniel & Timmins, Christopher, 2009. "Migration and hedonic valuation: The case of air quality," Journal of Environmental Economics and Management, Elsevier, vol. 58(1), pages 1-14, July.
    27. Grossman, Michael, 1972. "On the Concept of Health Capital and the Demand for Health," Journal of Political Economy, University of Chicago Press, vol. 80(2), pages 223-255, March-Apr.
    28. Marc F. Bellemare & Casey J. Wichman, 2020. "Elasticities and the Inverse Hyperbolic Sine Transformation," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 82(1), pages 50-61, February.
    29. Ghanem, Dalia & Zhang, Junjie, 2014. "‘Effortless Perfection:’ Do Chinese cities manipulate air pollution data?," Journal of Environmental Economics and Management, Elsevier, vol. 68(2), pages 203-225.
    30. Ying Long & Jianghao Wang & Kang Wu & Junjie Zhang, 2018. "Population Exposure to Ambient PM 2.5 at the Subdistrict Level in China," IJERPH, MDPI, vol. 15(12), pages 1-13, November.
    31. Chen, Siyu & Guo, Chongshan & Huang, Xinfei, 2018. "Air Pollution, Student Health, and School Absences: Evidence from China," Journal of Environmental Economics and Management, Elsevier, vol. 92(C), pages 465-497.
    32. Michael L Anderson, 2020. "As the Wind Blows: The Effects of Long-Term Exposure to Air Pollution on Mortality," Journal of the European Economic Association, European Economic Association, vol. 18(4), pages 1886-1927.
    33. Austin M. Williams & Daniel J. Phaneuf, 2019. "The Morbidity Costs of Air Pollution: Evidence from Spending on Chronic Respiratory Conditions," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 74(2), pages 571-603, October.
    34. Wolfram Schlenker & W. Reed Walker, 2016. "Airports, Air Pollution, and Contemporaneous Health," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 83(2), pages 768-809.
    35. Chen, Shuai & Oliva, Paulina & Zhang, Peng, 2022. "The effect of air pollution on migration: Evidence from China," Journal of Development Economics, Elsevier, vol. 156(C).
    36. Xia, Fan & Xing, Jianwei & Xu, Jintao & Pan, Xiaochuan, 2022. "The short-term impact of air pollution on medical expenditures: Evidence from Beijing," Journal of Environmental Economics and Management, Elsevier, vol. 114(C).
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Liao, Liping & Du, Minzhe & Chen, Zhongfei, 2021. "Air pollution, health care use and medical costs: Evidence from China," Energy Economics, Elsevier, vol. 95(C).
    2. Shihe Fu & V. Brian Viard, 2022. "A mayors perspective on tackling air pollution," Chapters, in: Charles K.Y. Leung (ed.), Handbook of Real Estate and Macroeconomics, chapter 16, pages 413-437, Edward Elgar Publishing.
    3. Chen, Siyu & Guo, Chongshan & Huang, Xinfei, 2018. "Air Pollution, Student Health, and School Absences: Evidence from China," Journal of Environmental Economics and Management, Elsevier, vol. 92(C), pages 465-497.
    4. Xinming Du, 2023. "Symptom or Culprit? Social Media, Air Pollution, and Violence," CESifo Working Paper Series 10296, CESifo.
    5. Colmer, Jonathan & Lin, Dajun & Liu, Siying & Shimshack, Jay, 2021. "Why are pollution damages lower in developed countries? Insights from high-Income, high-particulate matter Hong Kong," Journal of Health Economics, Elsevier, vol. 79(C).
    6. Xia, Fan & Xing, Jianwei & Xu, Jintao & Pan, Xiaochuan, 2022. "The short-term impact of air pollution on medical expenditures: Evidence from Beijing," Journal of Environmental Economics and Management, Elsevier, vol. 114(C).
    7. Tong Liu & Guojun He & Alexis Lau, 2018. "Avoidance behavior against air pollution: evidence from online search indices for anti-PM2.5 masks and air filters in Chinese cities," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 20(2), pages 325-363, April.
    8. Gillingham, Kenneth & Huang, Pei, 2021. "Racial disparities in the health effects from air pollution: Evidence from ports," ZEW Discussion Papers 21-058, ZEW - Leibniz Centre for European Economic Research.
    9. Cheung, Chun Wai & He, Guojun & Pan, Yuhang, 2020. "Mitigating the air pollution effect? The remarkable decline in the pollution-mortality relationship in Hong Kong," Journal of Environmental Economics and Management, Elsevier, vol. 101(C).
    10. Wang, Yangjie & Chen, Xiaohong & Ren, Shenggang, 2019. "Clean energy adoption and maternal health: Evidence from China," Energy Economics, Elsevier, vol. 84(C).
    11. Yao, Yao & Li, Xue & Smyth, Russell & Zhang, Lin, 2022. "Air pollution and political trust in local government: Evidence from China," Journal of Environmental Economics and Management, Elsevier, vol. 115(C).
    12. He, Guojun & Fan, Maoyong & Zhou, Maigeng, 2016. "The effect of air pollution on mortality in China: Evidence from the 2008 Beijing Olympic Games," Journal of Environmental Economics and Management, Elsevier, vol. 79(C), pages 18-39.
    13. A. Balietti & S. Datta & S. Veljanoska, 2022. "Air pollution and child development in India," Post-Print hal-03662124, HAL.
    14. Penghu Zhu & Boqiang Lin, 2022. "Vanishing Happiness: How Does Pollution Information Disclosure Affect Life Satisfaction?," IJERPH, MDPI, vol. 19(15), pages 1-19, August.
    15. He, Guojun & Liu, Tong & Zhou, Maigeng, 2020. "Straw burning, PM2.5, and death: Evidence from China," Journal of Development Economics, Elsevier, vol. 145(C).
    16. Xiaojing Jia & Xin Luo, 2023. "Residents’ Health Effect of Environmental Regulations in Coal-Dependent Industries: Empirical Evidence from China’s Cement Industry," Sustainability, MDPI, vol. 15(3), pages 1-16, January.
    17. Huang, Jialin & Xing, Jianwei & Yongchen Zou, Eric, 2023. "(Re)scheduling pollution exposure: The case of surgery schedules," Journal of Public Economics, Elsevier, vol. 219(C).
    18. Beshir, H.A.; & Fichera, E.;, 2022. "“And Breathe Normally†: The Low Emission Zone impacts on health and well-being in England," Health, Econometrics and Data Group (HEDG) Working Papers 22/09, HEDG, c/o Department of Economics, University of York.
    19. Chen, Shuai & Oliva, Paulina & Zhang, Peng, 2022. "The effect of air pollution on migration: Evidence from China," Journal of Development Economics, Elsevier, vol. 156(C).
    20. Shuai Chen & Paulina Oliva & Peng Zhang, 2017. "The Effect of Air Pollution on Migration: Evidence from China," NBER Working Papers 24036, National Bureau of Economic Research, Inc.

    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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp15839. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Holger Hinte (email available below). General contact details of provider: https://edirc.repec.org/data/izaaade.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.