Research On The Impact Of Air Pollution On Household Finance

Since the reform and opening up,China enjoys a fast economic growth.China’s GDP growth rate remains above 6%annually before 2019.This has created China’s growth miracle.However,the rapid growth over the years has also led to serious environmental pollution,and specifically air pollution.Air pollution has caused huge losses to China,such as economic and social development issues,traffic safety issues and public health issues.The 19th National Congress of the Communist Party of China stated that it will continue to promote air pollution and develop a green economy.The 14th Five-Year Plan has made a short-term plan for air quality improvement.The goal is to reach 87.5%of cities with good air quality at prefecture-level and above.In order to support the green industry and socio-economic sustainable development,seven ministries including the People’s Bank of China and the Ministry of Finance jointly issued the "Guiding Opinions on Building a Green Financial System"in 2016.The concept of green finance and green financial system was proposed.From a macro perspective,building a green financial system is good for the development of energy-saving related fields,and it is also good for accelerating the transition of my country’s economy to greening and improving the quality of economic development.From a micro perspective,the establishment of a green financial system can directly reduce ecological pollution,improve the living environment of residents,and enhance the health and well-being of residents.The financial behavior of households plays a vital role in the development of China’s financial market and even the development of the economy.In the context of green finance,will the implementation of green financial policies affect household finance?And what is the extent of its impact?In order to answer these questions,we first need to study the impact of air quality on household financial behavior.This paper uses various types of data to conduct a research,including the air quality and meteorological data of the China Research Data Services Platform(CNRDS),the annual PM2.5 of China’s provinces and cities from 2009 to 2018 at Dalhousie University,the China Family Panel Studies(CFPS)data from 2010 to 2018,China Health and Retirement Longitudinal Study(CHARLS)data from 2011 to 2018,online lending platform Renrendai transaction data,etc.The research of this paper mainly includes the following four conclusions.First,decline in air quality(increase in PM2.5 value)will increase the purchase of commercial medical insurance by households.The mechanism is that the decline in air quality will increase the health risks faced by households in the future,and the risk awareness of households will play a moderating role in their purchase of insurance.The analysis of heterogeneity shows that the households buy commercial medical insurance to a greater extent for female households,high-income households,and high-net-worth households.Further analysis finds that higher education and more disclosure of environmental information can increase the risk awareness of households,thereby increasing the degree of households’ purchase of insurance.Second,decline in air quality will increase the purchase of commercial medical insurance by households.The mechanism is that the decline in air quality will increase the health risks faced by households in the future,and the risk awareness of households will play a moderating role in their purchase of insurance.The analysis of heterogeneity shows that the households buy commercial medical insurance to a greater extent for female households,high-income households,and high-net-worth households.Further analysis finds that higher education and more disclosure of environmental information can increase the risk awareness of households,thereby increasing the degree of households’ purchase of insurance.Third,decline in air quality(increase in air quality index)will reduce the interest rate and amount of households’ borrowing from the online lending platform(Renrendai).The mechanism is that the decline in air quality will make households’emotions negative,and negative emotions will make households willingness to borrow decreases,which in turn reduces their borrowing needs.Heterogeneity analysis shows that air quality has a greater impact on women and elderly borrowers.we also examined the "adaptability" of borrowers in heating areas to air pollution.Borrowers in heating areas are less sensitive to changes in air quality,and borrowers in non-heating areas are more sensitive to changes in air quality.Fourth,decline in air quality(rise in air quality index)will reduce the consumer credit level of households.The way of impact is that air quality affects household’s physical and mental health,which in turn affects household’s willingness to consume credit,and ultimately leads to the reduction of households’consumer credit.Heterogeneity analysis shows that the decline in air quality has a greater impact on older borrowers.We also examined the "adaptability" of consumer creditors in heating areas to air pollution.Creditors in heating areas are less sensitive to changes in air quality,and creditors in non-heating areas are more sensitive to changes in air quality.