Research on the Impact of Air Pollution on the Cost of Living of Residents

Abstract To explore the impact of air pollution on residents' cost of living, this study selected balanced panel data from 161 prefecture-level cities for 2010–2020 and conducted a related study using fixed effects, 2SLS, and threshold models. The study found that, firstly, air pollution significantly raises the cost of living and has a short-term cumulative effect on the cost of living, i.e., the impression of past air pollution continues to affect residents' current cost of living. Secondly, air pollution itself and the level of the digital economy will make a threshold effect of air pollution on residents' cost of living, i.e., the higher the level of air pollution, the higher the cost of living of residents. However, as cities develop a higher level of the digital economy, the effect of air pollution on residents' cost of living will diminish. This reflects that cities with high levels of air pollution cause an increase in the cost of living for residents. However, the digital economy improves urban air quality by promoting industrial upgrading, technological innovation, and optimal resource allocation, thereby reducing the additional costs incurred by residents in dealing with air pollution. This study also reveals the intrinsic link between air pollution and the cost of living for residents, which has implications for cities coping with air pollution.