The Morbidity Cost of Air Pollution: Evidence from Consumer Spending in China

Published By: National Bureau of Economic Research (NBER) | Published Date: June, 01 , 2018

This paper provides knowledge the first analysis of the morbidity cost of PM2.5 for the entire population of a developing country. To address potential endogeneity in pollution exposure, it constructs an instrumental variable by modeling the spatial spillovers of PM2.5 due to long-range transport. It proposes a flexible distributed-lag model that incorporates the IV approach to capture the dynamic response to past pollution exposure. The analysis shows that PM2.5 has a significant impact on healthcare spending in both the short and medium terms that survives an array of robustness checks. The annual reduction in national healthcare spending from complying with the World Health Organization’s annual standard of 10 mg/m3 would amount to $42 billion, or nearly 7% of China’s total healthcare spending in 2015. In contrast to the common perception that the morbidity impact is modest relative to the mortality impact, our estimated morbidity cost of air pollution is about two-thirds of the mortality cost from the recent literature.

Author(s): Panle Jia Barwick, Shanjun Li, Deyu Rao, Nahim Bin Zahur | Posted on: Jun 12, 2018 | Views() | Download (46)

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