• Environmental and Resource Economics Review
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• v.29 no.2
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• pp.113-144
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• 2020

Throughout various data sources, it is widely observed that air quality in South Korea has become improved. Koreans, however, insist that their health status and economic burden due to worsened air quality get degenerated. This study aims to explain the mismatch between perception and measured data, air pollution-led medical expenses, and consumption behaviors in the economics perspectives. First, we demonstrated data-driven evidence of mismatch in the perceived severity of air pollution and its enhancement in measured data. Second, using the health demand model, we theoretically derived and empirically showed a co-rising relation between air pollution severity and medical expenses. Last, we analyzed that the perception led to increased defensive expenditures in consumption. This result implies the possibility of overestimation in air pollution impacts on socioeconomic losses and its possible reverse interpretation from increased social benefit after improved air quality. Our results recommend policy consideration to strengthen air quality standards, to support socially vulnerable groups regarding defensive expenditures, and to improve the accessibility and credibility of air pollution information.