Air pollution, health care use and medical costs: Evidence from China

Abstract

Using the micro data of China Family Panel Studies, this study quantifies the effect of air pollution on the health care use and medical costs of people in China. To avoid the potential endogenous biases, the thermal inversion and ventilation coefficient are used as instruments. Findings show that PM2.5 increases the medical care costs, hospitalization spending and self-payment costs of people significantly. Besides, the detrimental effect of air pollution is much larger for young people, and the long-term effect of PM2.5 on personal medical costs is much smaller. The evidence of two possible channels through which air pollution is related to medical use and hospital spending of people are found. On the one hand, the decrease of sleep hours caused by ambient air pollution is not beneficial for maintaining fitness, which could increase personal health care use or medical costs. On the other hand, people spend more hours in sedentary activities to avoid the exposure to air pollution, which is also positively associated with personal medical spending. This study implies that the social welfare loss should be considered when the costs and benefits of air pollution are calculated, and reducing air pollution is effective to improve the overall social welfare in the long run.