The 1992 passage of the Clean Air Act Amendments (CAAA) was an attempt to lower levels of air pollution and to protect public health in Taiwan. This study examines the effect of reduction in air pollutants on infant health. By using the birth data collected by the government, this study focuses on the probability of low birth weight as well as premature birth induced by air pollution concentration. Our results show that air pollution has significant negative health effects on newborn babies. However, economic incentives have reduced air pollutants increasing the health of newborn babies.