Pollution control and welfare growth: How environmental governance reshapes income inequality through population health improvement

We develop a health demand model anchored in Grossman's theoretical framework to examine the tripartite relationship between environmental governance , population health, and income inequality . Employing panel data from the China Health and Nutrition Survey and applying fixed-effects regression with instrumental variable estimation to address endogeneity, our analysis reveals two key findings: (1) Each incremental unit improvement in environmental governance reduces population morbidity risk by 2.8 percentage points; (2) Regions implementing rigorous environmental policies exhibit an 8.36 % reduction in income inequality proxies by Gini coefficient compared to their counterpart. More analysis underscores that environmental governance enhances health capital accumulation, particularly augmenting productivity for low- and middle-income individuals through reduced ambient pollution exposure. We also extension reveals that effective environmental governance shifts the production possibility frontier outward that generating Pareto improvements.