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The Health Care Cost of Air Pollution: Evidence from the World's Largest Payment Network

Author

Listed:
  • Panle Jia Barwick

    (University of Wisconsin-Madison and NBER)

  • Shanjun Li

    (Stanford University, NBER, and RFF)

  • Deyu Rao

    (The Hong Kong University of Science and Technology)

  • Nahim Bin Zahur

    (Queen's University)

Abstract

This paper exploits the universe of credit- and debit-card transactions in China during 2013–2015 and provides the first nationwide analysis of the health care cost of PM2.5 for a developing country. We leverage spatial spillovers of PM2.5 from long-range transport to generate exogenous variation in local pollution, and we employ a flexible distributed lag model to capture semiparametrically the dynamic response of pollution exposure. We find significant impacts of PM2.5 on health care spending in both the short and medium terms. A 10 μg/m3 decrease in PM2.5 would reduce annual health care spending by over $9.2 billion, about 1.5% of China's annual health care expenditure.

Suggested Citation

  • Panle Jia Barwick & Shanjun Li & Deyu Rao & Nahim Bin Zahur, 2026. "The Health Care Cost of Air Pollution: Evidence from the World's Largest Payment Network," The Review of Economics and Statistics, MIT Press, vol. 108(1), pages 110-128, January.
    • Handle: RePEc:tpr:restat:v:108:y:2026:i:1:p:110-128
    DOI: 10.1162/rest_a_01430
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    JEL classification:

    • I15 - Health, Education, and Welfare - - Health - - - Health and Economic Development
    • 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

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