The Health Care Cost of Air Pollution: Evidence from the World’s Largest Payment Network

Panle Jia Barwick; Shanjun Li; D. C. Rao; Nahim Bin Zahur

doi:10.1162/rest_a_01430

The Review of Economics and Statistics Vol. 108 No. 1 2026

The Health Care Cost of Air Pollution: Evidence from the World’s Largest Payment Network

Panle Jia Barwick¹; Shanjun Li ²; D. C. Rao³; Nahim Bin Zahur⁴

¹ University of Wisconsin-Madison and NBER · ² Stanford University, NBER, and RFF · ³ The Hong Kong University of Science and Technology · ⁴ Queen's University

Abstract

This paper exploits the universe of credit- and debit-card transactions in China during 2013–2015 and provides the first nationwide analysis of the health care cost of PM2.5 for a developing country. We leverage spatial spillovers of PM2.5 from long-range transport to generate exogenous variation in local pollution, and we employ a flexible distributed lag model to capture semiparametrically the dynamic response of pollution exposure. We find significant impacts of PM2.5 on health care spending in both the short and medium terms. A 10 μg/m3 decrease in PM2.5 would reduce annual health care spending by over $9.2 billion, about 1.5% of China’s annual health care expenditure.

DOI: 10.1162/rest_a_01430
Volume: 108
Issue: 1
Pages: 110-128
Language: en
Sources: openalex crossref

The Health Care Cost of Air Pollution: Evidence from the World’s Largest Payment Network

Abstract

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