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

Xin Zhang, Xun Zhang, Yuehua Liu, Xintong Zhao and Xi Chen
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Xin Zhang: Beijing Normal University
Xun Zhang: Beijing Normal University
Yuehua Liu: Tsinghua University
Xintong Zhao: Renmin University of China

No 15839, IZA Discussion Papers from Institute of Labor Economics (IZA)

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.

Keywords: willingness to pay; health spending; air quality; China (search for similar items in EconPapers)
JEL-codes: I11 I31 Q51 Q53 (search for similar items in EconPapers)
Pages: 49 pages
Date: 2022-12
New Economics Papers: this item is included in nep-cna and nep-env
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Published - published in: Journal of Population Economics, 2023, 36, 1269–1292

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Related works:
Journal Article: The morbidity costs of air pollution through the Lens of Health Spending in China (2023)
Working Paper: The Morbidity Costs of Air Pollution through the Lens of Health Spending in China (2023)
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