Considerations in Applying the General Equilibrium Approach to Environmental Health Assessment

Key words: 
• Human capital approach /
• Willingness-to-pay /
• General equilibrium approach

Abstract: There are currently two commonly used approaches to assessing economic impacts of health damage resulting from environmental pollution: human capital approach (HCA) and willingness-to-pay (WTP). WTP can be further divided into averted expenditure approach (AEA), hedonic wage approach (HWA), contingent valuation approach (CVA) and hedonic price approach (HPA). A general review of the principles behind these approaches by the authors indicates that these methods are incapable of unveiling the mechanism of health impact from the point of view of national economy. On a basis of economic system, the shocks brought about by health effects of environmental pollution change the labor supply and medical expenditure, which in turn affects the level of production activity in each sector and the total final consumption pattern of the society. The general equilibrium approach within the framework of macroeconomic theory is able to estimate the health impact on national economy comprehensively and objectively. Its mechanism and applicability are discussed in detail by the authors.