Is Economic Growth Bad for Your Health? Industrial Growth and Industrial Pollution in Indonesia

Jules R. Elkins, University of Illinois at Urbana-Champaign

The type of industrialization underway in today’s developing countries provides a poignant example of the pernicious side of economic growth. It is a process marked by rapid urbanization, crowding, and rampant industrial pollution. Adverse health consequences of pollution have proven difficult to measure, however, since industrialization also has positive effects, the most salient of which lies in rising incomes. This study exploits the Indonesian financial crisis as a ‘natural experiment’ to circumvent identification problems due to omitted variables that have plagued previous studies – since pollution is not random, it is difficult to control for all the variables that may impact health other than pollution, but that incidentally accompany pollution. Results show that the change in incidence of all respiratory problems, coughing, and breathing difficulty was positively correlated with the sub-district’s change in pollution. Other health problems, including fever, headache, flu, accidents, mortality, doctor visits, and medication were insignificant or negative.