What does poor air quality lead to? - The influence of air pollution on elderly medical expenditures in China

As China's population ages rapidly, it becomes increasingly important to understand the challenges faced by the elderly. This study examines the impact of air pollution measured by PM₂.₅ exposure on medical expenditures for individuals aged 65 and above. By analyzing five waves of micro-level panel data from 2005 to 2018 using econometric methods including two-way fixed effects, Honoré's estimator, and the Heckman two-stage model, we find that higher PM₂.₅ exposure is significantly associated with increased medical expenditures among the elderly. Mechanism analysis using survival models shows that long-term pollution exposure reduces life expectancy, accelerating health capital depreciation in later life. Additionally, elevated PM₂.₅ concentrations increase the risk of respiratory and other diseases, further raising medical expenditures. The effects are particularly pronounced for women, high-income individuals, residents of developed regions, and those paying out-of-pocket, highlighting how environmental hazards exacerbate health inequalities. Overall, these findings provide compelling evidence that air pollution imposes a persistent, unequal, and age-sensitive health burden in China, underscoring the urgent need for coordinated policies that address both environmental protection and public health concerns.