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Applying a structural panel vector autoregression (VAR) model to panel datasets for 108 cities between 2000 and 2015, we evaluate the effect of SO2 on China’s gross domestic product (GDP) growth by calculating the costs associated with this pollutant and its health effects. The results indicate that SO2 emissions promote GDP growth on a national scale but exhibit high regional heterogeneity in terms of cost. Specifically, although the costs exceed 20% in central China, implying that this environmental pollution contributes more than one-fifth of the GDP, and equal approximately 5% in western China, they have already begun to hinder economic growth in the eastern part of the nation. We also find that the health costs total approximately 2%, 3%, and 1% of the GDP per capita for the eastern, central, and western regions, respectively, revealing that rapid economic growth has been achieved at the expense of health.

Impact of SO2 Emission on the Gross Domestic Product Growth of China