Flows of Air Pollution, Ill Health and Welfare

We provide a theoretical framework for measuring welfare when pollution influences economic growth by impairing health and driving up defensive medical expenditures. We demonstrate the usefulness of our framework in practice by applying it to data from Swedish valuation studies designed according to...

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Bibliographic Details
Published in:Environmental & resource economics 2007-06, Vol.37 (2), p.445-463
Main Authors: Huhtala, Anni, Samakovlis, Eva
Format: Article
Language:English
Subjects:
Accounting
Air pollution
Commodities
Costs
defensive expenditures
Driving ability
Economic development
Economic growth
Emissions
Environmental economics
Environmental policy
Environmental tax
Expenditures
Externalities
Externality
GDP
green accounting
Gross Domestic Product
Growth models
Health care
Health care expenditures
Health care industry
Health expenditure
I10
Illness
Influence
Labor economics
Labor productivity
Morbidity
Nitrogen dioxide
Outdoor air quality
Pollutants
Pollution
Production functions
Productivity
Q25
Respiratory diseases
respiratory illnesses
Studies
Subsidies
Sweden
Taxation
Usefulness
Valuation
Welfare
Welfare economics
Welfare measurement
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Summary:We provide a theoretical framework for measuring welfare when pollution influences economic growth by impairing health and driving up defensive medical expenditures. We demonstrate the usefulness of our framework in practice by applying it to data from Swedish valuation studies designed according to the accounting principles suggested here. We estimate that the negative health effects of nitrogen dioxide emissions amount to 0.6% of GDP in Sweden. We also show that a corrective Pigouvian tax should internalize the direct disutility, reduced labor productivity, and increased healthcare expenditures caused by pollution. According to our calculations, harmful health impacts alone (excluding ecosystem effects) justify 65% of the current Swedish tax on nitrogen dioxide.
ISSN:0924-6460
1573-1502
DOI:10.1007/s10640-006-9033-z