From Pollution Exposure to Health and Economic Loss: Micro‐Level Evidence From Industrial Zones in Bangladesh

ABSTRACT

Rapid industrialization has significantly contributed to economic growth in developing countries, but it has also generated substantial environmental externalities, particularly air pollution. This study investigates the micro‐level relationship between pollution exposure, health outcomes, and household economic burden among communities living near industrial zones in Bangladesh. Using primary survey data from 520 respondents located near the Chattogram Export Processing Zone (EPZ), the analysis constructs a pollution exposure index based on proximity to industrial activity, visible emissions, outdoor exposure, and household ventilation conditions. Health impacts are measured using a composite morbidity index capturing both self‐reported symptoms and medically diagnosed conditions. The study employs Ordinary Least Squares (OLS) to estimate the relationship between pollution exposure and morbidity, and a Generalized Linear Model (GLM) with a Gamma distribution and log link to analyze healthcare expenditure. The results show that higher pollution exposure is significantly associated with higher morbidity levels, even after controlling for socioeconomic and demographic factors. Moreover, increased exposure is associated with higher household healthcare expenditure, with morbidity acting as a key transmission channel. A one‐unit increase in pollution exposure is associated with an approximate 20–25 percent increase in expected medical spending. These findings highlight how industrial pollution imposes significant health and economic burdens on respondents residing near industrial zones and underscore the need for stronger environmental regulation, cleaner industrial technologies, and improved public health interventions to mitigate pollution‐related risks.

JEL Classification: 15, Q53, Q56