Does Industrial Air Pollution Increase Health Care Expenditure? Evidence From China

Abstract

This paper discusses the impact of air pollution on medical expenditure in eastern, central, and western China by applying the fixed-effect model, random-effect model, and panel threshold regression model. According to theoretical and empirical analyses, there are different relationships between the two indexes in different regions of China. For eastern and central regions, it is obvious that the more serious the air pollution is, the more medical expenses there are. However, there is a non-linear single threshold effect between air pollution and health care expenditure in the western region. When air pollution is lower than this value, there is a negative correlation between them. Conversely, the health care expenditure increases with the aggravation of air pollution, but the added value is not enough to make up for the health problems caused by air pollution. The empirical results are basically consistent with the theoretical analysis, which can provide enlightenment for the government to consider the role of air pollution in medical expenditure. Policymakers should arrange the medical budget reasonably, according to its situation, to make up for the loss caused by air pollution.