We estimate the effect of acute air pollution exposure on mortality, life-years lost, and health care utilization among the US elderly. We address endogeneity and measurement error using a novel instrument for air pollution that strongly predicts changes in fine particulate matter (PM 2.5) concentrations: changes in the local wind direction. Using detailed administrative data on the universe of Medicare beneficiaries, we find that an increase in daily PM 2.5 concentrations increases three-day county-level mortality, hospitalizations, and inpatient spending, and that these effects are not explained by co-transported pollutants like ozone and carbon monoxide. We then develop a new methodology to estimate the number of life-years lost due to PM 2.5. Our estimate is much smaller than one calculated using traditional methods, which do not adequately account for the relatively low life expectancy of those killed by pollution. Heterogeneity analysis reveals that life-years lost due to PM 2.5 varies inversely with individual life expectancy, indicating that unhealthy individuals are disproportionately vulnerable to air pollution. However, the largest aggregate burden is borne by those with medium life expectancy, who are both vulnerable and comprise a large share of the elderly population.
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