Air pollution, migration costs, and urban residents’ welfare: A spatial general equilibrium analysis from China

Abstract

Air pollution and its effects are important issues of human society. However, few literatures on the effect of air pollution on urban residents' welfare considered the cost of migration. This paper constructs a novel spatial general equilibrium model and studies the impact of air pollution on urban residents' welfare in 274 cities at and above the prefectural level in China from 2007 to 2017, and investigates the role of migration costs. The theoretical analysis and empirical research show that air pollution has a significant negative impact on the welfare of residents. Further, the simulation results indicate that the reduction of migration cost and the improvement of air quality accounts for roughly 24.65% improvement of resident's welfare from 2007 to 2017 in China. Another conclusion is that there is an inverted U-shaped relationship between resident's welfare and air pollution. On another side, migration costs play a moderating role in the impact path of air pollution on residents' welfare. When the migration costs fall, it will help residents to move out of cities with poor air quality and improve the resident's welfare. The policy suggestions are as follows: (1) In the process of sustainable development, local governments need to coordinate the phased characteristics between air pollution and residents' welfare, effectively improve the livable degree of city and urban economic sustainability, and prevent the brain drain caused by excessive migration of residents. (2) Local governments should lower the migration costs between cities by deepening the reform of the household registration system, so as to promote the free flow of labor and ultimately improve the welfare of residents.