Abstract We develop a health demand model informed by Grossman's theoretical framework, examining how air pollution governance (APG) affects health and income inequality. Analysis of the China Health and Nutrition Survey data reveals that APG has markedly enhanced the health status of local residents, consequently mitigating regional income inequality. For every doubling of air pollution control, the likelihood of residents falling ill diminishes by 40.3 per cent; in contrast to regions with inadequate APG, the income inequality coefficient in regions with robust APG declines by approximately 6.2 per cent. An in-depth examination of the welfare implications of APG, both theoretically and empirically, reveals that such governance enhances the ‘production possibility frontier’ for the population, thereby augmenting individual utility.
Liao et al. (2026) studied this question.