When externalities collide: influenza and pollution
A more recent version of this paper has been published in the American Economic Journal: Applied Economics in April 2023.
Influenza, or flu, and air pollution are significant public health risks that impact nations around the world with large economic consequences.
The authors of this paper show that increased levels of air pollution significantly increase the rate of hospitalisation for people with flu. In addition, they find that protection afforded by the flu vaccine greatly diminishes the relationship between air pollution and hospitalisation and reduces the social and medical costs of poor air quality. This suggests that seemingly disparate policy actions of pollution control and vaccination campaigns jointly provide greater returns than those implied by addressing either problem in isolation.
The insights regarding compounding risks from pollution and flu may extend to other viral respiratory illnesses, including the current COVID-19 pandemic, and are also relevant for climate change policies given their significant overlap with air quality policies.
Key points for decision-makers
- The flu causes an estimated 3–5 million severe cases per year, and nearly half a million deaths.
- Air pollution causes 4.5 million annual deaths, with annual economic costs estimated to exceed $US 800 billion in the US alone.
- Interactions between the flu and pollution are an illustration of compounding risk from interacting ‘externalities’.
- The authors’ analysis demonstrates that policies to address these distinct externalities have significant interactive effects: the flu vaccine can protect against certain harms from air pollution through increased flu vaccination rates or improvements in flu vaccine strain matches, while reduced levels of air pollution lessen the harmful effects of exposure to flu.
- The positive impacts of addressing these problems in conjunction may be particularly high in dense urban centres around the world, and developing countries in particular, where population density and high levels of pollution increase the intensity of the interaction between the flu and air pollution.
This working paper was originally published in June 2021 and was updated in July 2022.