Abstract
Environmental quality is an important determinant of individuals’ well-being and one of the main concerns of the governments is the improvement on air quality and the protection of public health. This is especially the case of sensitive demographic groups, such as the old aged people. However, the question this study attempts to answer is how do individuals value the effects on the environment. The study explores the effects of old and early public pension schemes, as well as the impact of air pollution on health status of retired citizens. The empirical analysis relies on detailed micro-level data derived from the Survey of Health, Ageing and Retirement in Europe (SHARE). As proxies for health, we use the general health status and the Eurod mental health indicator. We examine two air pollutants: the sulphur dioxide (SO2) and ground-level ozone (O3). Next, we calculate the marginal willingness-to-pay (MWTP) which shows how much the people are willing to pay for improvement in air quality. We apply various quantitative techniques and approaches, including the fixed effects ordinary least squares (OLS) and the fixed effects instrumental variables (IV) approach. The last approach is applied to reduce the endogeneity problem coming from possible reverse causality between the air pollution, pensions and the health outcomes. For robustness check, we apply also a structural equation modelling (SEM) which is proper when the outcomes are latent variables. Based on our favoured IV estimates and the health status, we find that the MWTP values for one unit decrease in SO2 and O3 are respectively €221 and €88 per year. The respective MWTP values using the Eurod measure are €155 and €68. Overall, improvement of health status implies reduction in health expenditures, and in previous literature, ageing has been traditionally considered the most important determinant. However, this study shows that health lifestyle and socio-economic status, such as education and marital status, are more important, and furthermore, air pollution cannot be ignored in the agenda of policy makers.
Highlights
Responsible editor: Philippe GarriguesAir pollution is one of the most important problems around the globe, with significant adverse effects on health and environment
The objective of this study is to examine the effects of old and early age pensions on health status and mental health measured by Eurod, including air pollution and sulphur dioxide (SO2) and ground-level ozone (O3) and controlling for weather data, individual and demographic characteristics
Set μi denotes the individual-fixed effects, lj is the location of NUTS 3 fixed effects, with the exception of Germany which is based on NUTS 2. θt is a time-specific vector, while lj T is a set of area-specific time trends which controls for unobservable, time-varying characteristics in the area
Summary
Air pollution is one of the most important problems around the globe, with significant adverse effects on health and environment. Air pollution contributes to respiratory and heart diseases, lung cancer and brain damage (Lee et al 2014). It causes damage to crops, animals, and contributes to the formation of acid rain (Parson 2003). The WHO report on air pollution shows that yearly almost 7 million people die because of exposure to air pollution, doubling previous estimates and presenting air pollution as the world’s largest single environmental health risk (WHO 2014). In 2012, the number of premature deaths attributable to ground-level ozone in EU-28 reached the 16,000, and 72,000 due to nitrogen dioxides (NO2) (EEA 2015). This is the main motivation and urgency of this study due to persistency of the air pollution
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