Human activities to boost economic wellbeing have degraded the environment on many fronts to the extent that earth has reached its planetary boundaries by sabotaging its self-regulating equilibrium system. This study investigates the impact of air pollution (proxied by various indicators) on health expenditure over a panel consisting of 188 countries for the period 2000-2018. The impact of air pollution on health expenditures was analyzed using the GMM estimations. Findings suggest that health expenditures are increased due to air pollution caused by economic activities. The study urges that governments should reconsider their policies by creating a balance between economic growth and environmental sustainability. While spending on a sustainable environment, humans can have better health and working capacities that will ultimately contribute to the overall economy. A carbon taxing system on businesses that use obsolete technologies can also contribute towards a sustainable environment and reduced air pollution.
TopIntroduction
Concerning pollution and human health, a complex and long history has been cited in the literature. Urban populations of ancient Rome and Athens were the first to raise their voices for it (Colbeck, 2007). In comparison, the worsened situations regarding these issues were first felt during the Industrial Revolution era. Due to the extensive use of coal during this era, some historians have even used the term “Smoke Age” for this period (Mosley, 2014). But these concerns were not shaped to manage this issue with strong and efficient regulatory supervision at a global level (Stutz, 2010). It explains the reason that why humans have to face a series of environment-related health issues. This issue was restricted to limited geographic areas. Still, after World War II, the after-effects of armaments and wide-spread use of energy, fossil fuels, and industrialization resulted in frequent acid rains, chemical smog, ozone issues, and abrupt climate changes (Sieferle, 2001). Logically, these frequent environmental issues can impact human health conditions (Boogaard, et al., 2019). Until recently, the human population cannot breathe clean air, and this issue is of greater concern in industrial and metropolitan urban areas.
On the other hand, to improve living standards, the world has witnessed intense competition to achieve economic growth. Though, because of the economic growth, mother nature has faced severe problems of environmental degradation and, most prominently, air pollution (Baloch, et al., 2020). According to the World Health Organization (WHO), 3.8 million people per year suffer from premature death due to illness caused by air pollution (WHO, 2021a).
The adverse impact of air pollution can be quantified by considering health expenditure. Health expenditure has a significant role in formulating national health and environmental policy. The real challenge for policymakers is to manage health costs and accomplish economic growth at the same time. For instance, stringent regulations for environmental protection may reduce profits by firms, and on the other hand, relaxed regulations may affect the health of a population (Chen & Chen, 2021). Nieto (2017) explains that a sudden change in policies to switch towards a low-carbon economy will create uncertainty in a region. Giving an example of European banks, Nieto (2017) explains that as of December 2014, €1.35 trillion of lending amount belongs to a sector that has a sizable portion in causing environmental damage that is gas and oil exploitation companies. A sudden shift will not only harm these firms alone, but it would also affect the banks by losing their assets, impair GDP, and harm the overall economy (Nieto, 2017).
There is no doubt that acquiring the optimal solution, i.e., a balance between environmental and economic sustainability, is not an easy task due to a lack of accurate health cost estimations. Contrary to this, several studies have established that the impact of air pollution is different on every individual based on their economic conditions. For example, Jans, Johansson, and Nilsson (2018) found that children from high-income households are less affected by air pollution than children WHO belong to low-income households. Thus, it can be said that economic growth is necessary for a country that makes it capable of providing good health services to its citizen. On the other hand, rapid economic activities also create health problems for citizens by increasing air pollution and environmental degradation. Therefore, policymakers must assess that to what extent air pollution caused by economic activities increases health expenditures.
Few studies have assessed the impact of air pollution on economic output and health expenditure in a small number of regions (Selin, et al., 2009; Xie et al., 2016). However, based on Gaia theory and life history theory, this study is among the few that conducted cross-country analysis to assess the impact of greenhouse gas emissions and PM2.5 air pollution exposure to a population exceeding the levels set by the World Health Organization (WHO) guidelines on health expenditure per capita.
This study would also help policymakers assess environmental degradation caused by economic activities on health-related issues. The cost of economic activities without considering the impact on the environment increases the health expenditures of the governments. In this context, policymakers need to create a balance between economic growth and environmental sustainability. If environmental sustainability is not considered while introducing policies for achieving economic growth. In that case, it will affect the economy itself eventually by increasing health expenditure, loss of GDP, and human capital as well.