Air Pollution and Household Medical Expenses: Evidence From China

Abstract

By matching air quality index (AQI) data with the household data from China Family Panel Studies (CFPS), we identify the impact of air pollution on household medical expenses from a micro perspective. The results show that higher air pollution will increase household medical expenses and change household consumption structure. This effect is still significant after controlling for cities' relevant household and individual characteristics and economic characteristics. Under different educational backgrounds, income, hukou, gender, and other conditions, air pollution will significantly reduce medical spending. For those females in the urban areas with higher education backgrounds and higher income, the spending elasticity of air pollution is more significant than other corresponding groups. And air pollution will promote medical expenses through stronger individuals' environmental awareness, poor health conditions, bad emotional status, and positive risk aversion. Furthermore, we find that the impact of air pollution on healthcare spending remains significant after instrumental variables regression and geographical regression based on the Qinling Mountains-Huaihe River Line.