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

Author

Listed:
  • Zhang, Xin
  • Zhang, Xun
  • Liu, Yuehua
  • Zhao, Xintong
  • Chen, Xi

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, 2023. "The Morbidity Costs of Air Pollution through the Lens of Health Spending in China," GLO Discussion Paper Series 1217, Global Labor Organization (GLO).
    • Handle: RePEc:zbw:glodps:1217
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    Citations

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    Cited by:

    1. Ziheng Liu & Xi Chen & Qinan Lu, 2025. "Blowin’ in the wind of an invisible killer: long-term exposure to ozone and respiratory mortality in the USA," Journal of Population Economics, Springer;European Society for Population Economics, vol. 38(3), pages 1-30, September.
    2. Ju, Heng & Tang, Yao & Zhang, Meilan, 2024. "Air Pollution's Grip: Drug Cost and Its Heterogeneity in China," MPRA Paper 121154, University Library of Munich, Germany.
    3. Yu Shen & Wenkai Sun, 2025. "The winter depression: coal heating and mental health in China," Journal of Population Economics, Springer;European Society for Population Economics, vol. 38(1), pages 1-32, March.
    4. Linhui Wang & Zhanglu Cao & Hui Wang & Junsen Zhang & Jun Luo, 2025. "Air pollution, health, migration, and innovation: evidence from urban China," Journal of Population Economics, Springer;European Society for Population Economics, vol. 38(3), pages 1-62, September.
    5. Yuming Wu & Katsunori Furuya & Bowen Xiao & Ruochen Ma, 2025. "Optimizing Urban Green Roofs: An Integrated Framework for Suitability, Economic Viability, and Microclimate Regulation," Land, MDPI, vol. 14(9), pages 1-33, August.
    6. Jin, Bohan & Li, Zheng, 2024. "Air pollution, healthcare use, and inequality: Evidence from China," Economic Modelling, Elsevier, vol. 141(C).
    7. Wang, Ying & Liu, Zisen, 2024. "Under the dome: Air pollution and analyst forecast optimism," Research in International Business and Finance, Elsevier, vol. 70(PA).
    8. Liu, Kui & Meng, Chuyan & Yang, Shasha & Zhang, Guanglu, 2024. "Air pollution and individual risk preference: Evidence from China," Energy Economics, Elsevier, vol. 136(C).
    9. Liu, Zisen & Wang, Xin & Wang, Ying, 2024. "Air pollution and perk consumption," International Review of Financial Analysis, Elsevier, vol. 96(PB).

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    Keywords

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    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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