Distributional Effects of Air Pollution on Cognition of the Medicare Population

Air pollution degrades the stocks of health capital and human capital. Elevated exposure to particulate matter (PM) constrains the production of human capital among children (Isen, Rossin-Slater and Walker 2017), reduces labor productivity among prime-age workers (Archsmith, Heyes and Saberian 2017), and permanently impairs cognition late in life by increasing the risk of dementia (Underwood 2017). In a national study of Medicare beneficiaries, Bishop, Ketcham, and Kuminoff (2018) found that, all else constant, a 1 microgram-per-cubic-meter increase in average exposure to fine-particulate air pollution over a 10-year period (9.1% of the mean) increases the probability of receiving a dementia diagnosis after age 75 by 1.3 percentage points (6.7% of the mean). We extend the study in this paper to investigate distributional implications.

We link fifteen years of Medicare records for 6.9 million adults age 65 and older to the EPA’s air quality monitoring network and track the evolution of individuals’ health, onset of dementia, financial decisions, and cumulative residential exposure to fine-particulate air pollution (PM_2.5). Our instrumental variables framework capitalizes on quasi-random variation in pollution exposure due to the EPA’s 2005 designation of nonattainment counties for PM_2.5. We use these data to investigate how the effect of long-term air pollution exposure on dementia varies with:

1. Geographic location, as the composition of PM₅ changes across the United States with the distribution of polluting sources (e.g. power plants, cars, industrial manufacturing).
2. Demographics, such as age, race, gender, income and education. These characteristics may reflect differences in exposure and vulnerability. Knowing if and how exposure levels and their health implications vary by race and gender is particularly relevant for evaluating the Environmental Protection Agency’s criteria for whether pollution regulations satisfy environmental justice criteria.
3. Health, such as the presence of cardiovascular illnesses—hypertension, diabetes, heart disease, stroke—that may modify an individual’s vulnerability to air pollution.

KEY WORDS: Air pollution, Alzheimer’s, Decision making, Dementia

JEL CODES: D03, D83, I1, Q52, Q53

Archsmith, James, Anthony Heyes and Soodeh Saberian. 2017. “Air Quality and Error Quantity: Pollution and Performance in a High-skilled, Quality-focused Occupation”. Forthcoming in the Journal of the Association of Environmental and Resource Economists.

Bishop, Kelly C., Jonathan D. Ketcham, and Nicolai V. Kuminoff. 2018. “Hazed and Confused: The Effect of Air Pollution on Dementia.” NBER Working Paper #24970.

Isen, Adam, Maya Rossin-Slater and W. Reed Walker. 2017. “Every Breath You Take- Every Dollar You’ll Make: The Long-Term Consequences of the Clean Air Act of 1970”. Journal of Political Economy, 125(3): 849-909.

Underwood, Emily. 2017. “The Polluted Brain”. Science. 355(6323): 342-345.