The Short-Term Impact of Air Pollution on Medical Expenditure: Evidence from Beijing

Abstract

We identify the short-term effects of PM2.5 concentrations on medical costs in Beijing by analyzing two datasets: one detailing daily air quality indexes over a four-year period and the other containing individual-level records of all health care visits and medical transactions that occurred under a government insurance program that covers most city residents. We find that both higher levels of air pollution and longer-lasting pollution episodes significantly increase health care visits and medical expenditures. An analysis of multiple-day pollution episodes shows that marginal health care visits and marginal health costs start to increase as the pollution event lasts for consecutive days. Omitting the variation in the magnitude of the marginal effects of pollution exposure over the course of a pollution episode would lead to the underestimation of the total health costs of air pollution. Our findings provide empirical evidence that both the intensity and the duration of pollution episodes are critical considerations when designing policies to reduce the health costs of air pollution.

Keywords: air pollution, medical costs, heterogeneous impacts, pollution episodes

JEL Classification: I15, Q51, Q53