The Impact of Air Pollution, Health, Productivity on Welfare in Indonesia

English

Abstract

This article examines the impact of air pollution on health, productivity, and welfare in
Indonesia, using a vector autoregression (VAR) model. Air pollution can cause various
diseases and deaths, reduce labor supply and output, increase health care costs, and lower
quality of life. Indonesia is one of the developing countries that suffers from high levels
of air pollution, especially in urban areas. The main sources of air pollution in Indonesia
are forest fires, transportation, industry, power generation, and household burning. The
article reviews the current evidence on the health, productivity, and welfare effects of air
pollution in developing countries. The article also applies a VAR model to estimate the
effect of government consumption expenditure (GCG) on PM2.5 concentration (REC),
labor force participation rate (LFP), and health expenditure per capita (CHE). The article
finds that GCG has a negative and significant impact on itself, no significant impact on
LFP, and positive and significant impacts on REC and CHE. The article concludes that
air pollution has complex and heterogeneous effects on health, productivity, and welfare
in Indonesia, and that policy makers should adopt a comprehensive and context-specific
approach to reduce air pollution levels and protect vulnerable populations.