The Effects on Well-Being of Investing in Cleaner Air in India

Warren C. Sanderson, Stony Brook University, State University of New York (SUNY)
Erich Striessnig, Wittgenstein Centre (IIASA, VID/ÖAW, WU)
Wolfgang Schoepp, International Institute for Applied Systems Analysis (IIASA)
Markus Amann, International Institute for Applied Systems Analysis (IIASA)

Over the past decade, India has experienced rapid economic growth along with increases in air pollution and consequent serious health effects. We examine how policies for air pollution abatement affect wellbeing by calibrating an overlapping-generations model of economic growth to the Indian experience from 1971 to 2001 and estimating the effects of policy alternatives on measures of wellbeing for the period from 2010 to 2030. In particular, we focus on the effect of policies to reduce ambient fine particulates (PM2.5). Our model allows improvements in health to affect economic growth by: decreasing mortality, and therefore changing population age-structure; decreasing morbidity; and changing the age pattern of personal savings. We consider two scenarios of PM2.5 abatement, roughly corresponding to current Indian and European legislation. The net effect in both cases is that GDP growth is virtually unaffected, the number of deaths is reduced, and the HDI is higher.