Air pollution, defensive behaviors, and medical expenditures

This study examines the impact of air pollution on medical expenditures in China and the effectiveness of personal defensive measures in mitigating these costs. Using individual-level data from the China Household Finance Survey (CHFS) encompassing 298,689 residents from 2011 to 2019, we employ an instrumental variables regression model to control for potential endogeneity of air pollution. We find that a 1 μg/m³ increase in PM_2.5 increases personal medical costs by 244 CNY (5.7 % of total expenses). In particular, the results show that proactive measures, such as purchasing private health insurance and using protective gear like masks and air purifiers, significantly reduce air pollution-related medical expenditures. Health insurance alone can reduce these costs by approximately 71.7 CNY (1.67 % of total expenditure), highlighting the economic benefits and positive externalities associated with defensive behaviors. Our findings suggest that policies promoting health insurance coverage and access to protective gear could alleviate the financial burden on affected populations.