The Adverse Impact of Air Pollution on China’s Economic Growth

Daxin Dong, Boyang Xu, Ning Shen and Qian He
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Daxin Dong: School of Business Administration, Faculty of Business Administration, Southwestern University of Finance and Economics, Chengdu 611130, China
Boyang Xu: School of Business Administration, Faculty of Business Administration, Southwestern University of Finance and Economics, Chengdu 611130, China
Ning Shen: School of Business Administration, Faculty of Business Administration, Southwestern University of Finance and Economics, Chengdu 611130, China
Qian He: School of Business Administration, Faculty of Business Administration, Southwestern University of Finance and Economics, Chengdu 611130, China

Sustainability, 2021, vol. 13, issue 16, 1-27

Abstract: This study empirically evaluates the impact of air pollution on China’s economic growth, based on a province-level sample for the period 2002–2017. Air pollution is measured by the concentration of fine particulate matter (PM 2.5 ), and economic growth is measured by the annual growth rate of gross domestic product (GDP) per capita. A panel data fixed-effects regression model is built, and the instrumental variables estimation method is utilized for quantitative analyses. The study reports a significant negative impact of air pollution on the macroeconomic growth of China. According to our instrumental variables estimation, holding other factors constant, if the concentration of PM 2.5 increases by 1%, then the GDP per capita growth rate will decline by 0.05818 percentage points. In addition, it is found that the adverse effect of atmospheric pollution is heterogeneous across different regions. The effect is stronger in the eastern region and in provinces with smaller state-owned enterprise shares, fewer governmental expenditures for public health services, and fewer medical resources. The study results reveal that air pollution poses a substantial threat to the sustainable economic growth of China. Taking actions to abate air pollution will generate great economic benefits, especially for those regions which are heavily damaged by pollution.

Keywords: air pollution; PM 2.5; economic growth rate; GDP per capita; China (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2021
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