Does air pollution aggravate income inequality in China? An empirical analysis based on the view of health

Abstract

Given the rapid development of the Chinese economy, especially its accelerated urbanization, air pollution and income inequality, as two of the most important global issues, have also become hot topics in China. However, limited attention has been devoted to understanding their joint evolution in the literature. In this study, we thus investigate the relationship between them using a multi-level nested data model, which enables us to estimate the long-run distribution effect of air pollution on individuals of different socioeconomic statuses, based on China’s city-level PM2.5 emissions and individual-level income. We further examine the mechanisms behind the evolution using a 3SLS model. The estimation results reveal that the increase in air pollution concentration has short-term positive production effects and long-term negative impacts on individual income, and will exacerbate the income inequality across socioeconomic statuses. Individuals of lower socioeconomic status have disadvantages in achieving efficient avoiding knowledge and measures. The results of 3SLS model confirm the existence of the health channel through which air pollution exerts influence on income inequality. These results provide a roadmap for policymakers. First, a comprehensive assessment of the health burden distribution from air pollution on individuals of different socioeconomic statuses should be considered for environmental policymaking. Second, the regional disparities and differences among income groups should also be considered during this process. Third, equal access to basic public services should be the primary target of environmental regulations. Moreover, compensation and assistance for the health issues caused by environmental pollution could be an important supplement to these regulations. Future study could do further analysis of the specific level of health burden due to different types of pollutants and their relationship with income inequality.