Exploring Asymmetric Nexus Between CO2 Emissions, Environmental Pollution, and Household Health Expenditure in China

Muhammad Zeeshan,1 Jiabin Han,1 Alam Rehman,2 Irfan Ullah,3 Fakhr E Alam Afridi4 1College of Business Administration, Liaoning Technical University, Xingcheng, Liaoning Province, 125105, People’s Republic of China; 2Faculty of Management Sciences, National University of Modern Languages, Islamabad, Pakistan; 3Reading Academy, Nanjing University of Information Science and Technology, Nanjing, People’s Republic of China; 4Islamia College Peshawar, Peshawar, PakistanCorrespondence: Alam RehmanFaculty of Management Sciences, National University of Modern Languages, PakistanEmail amrehman@numl.edu.pkObjective: This study investigates the nexus between household health expenditure, CO2 emissions and environmental pollution in China. We analyzed the asymmetric dynamic relationship between CO2 emissions, environmental pollution and household health expenditure for the period 1990 to 2019 in China.Methods: This study adopted nonlinear autoregressive distributed lag (NARDL) and Granger causality following the diagnostic test. Furthermore, we applied Dickey–Fuller (ADF), PP unit root tests, Zivot and Andrews test for structural breaks in our analysis. The NARDL is the most suitable econometric technique for estimations, especially if the asymmetric relationship exists among the variables. NARDL technique is capable to explore the dynamic relationship between CO2 emissions, environmental pollution and household health expenditure.Results: The empirical results verify the asymmetric nexus between CO2 emissions, environmental pollution and household health expenditure in the context of China. The outcomes revealed that in the short run and long run positive shocks of CO2 emissions and environmental pollution positively affecting health expenditure, while negative shocks reduce health spendings. The results also demonstrate bi-directional causality among household health spendings, CO2 emissions and environmental pollution.Conclusion: Our results support many previous studies, documenting that CO2 emissions positively contribute to the amount of household health expenditure, confirming the asymmetric relationship between CO2 emissions and household health expenditure. The results also confirm the statistically significant and asymmetrically positive relationship between environmental pollution and household health expenditure. This implies that Chinese residents have to bear more household health expenditure, in the case of more CO2 emissions and a greater amount of environmental pollution.Keywords: CO2 emissions, environmental pollution, household health expenditure, China