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The effects of medical insurance on durables consumption in rural China

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  • Meiling Ying
  • Zaichao Du

Abstract

Purpose – The New Rural Cooperative Medical Scheme (NRCMS), implemented in China since 2003, has greatly increased the access of the poor to health services and alleviated the hardship caused by catastrophic medical payments. Both the precautionary saving theory and the Buffer-Stock saving theory would predict a positive effect of this event on consumption. The purpose of this paper is to empirically study the effects of medical insurance on durables consumption in rural China. Design/methodology/approach – Using China Health and Nutrition Survey (CHNS) data, the authors study the effects of medical insurance on durable goods consumption in rural China through a panel binary choice model. Findings – It is found that households with medical insurance have a significantly higher level of durables consumption, and their probabilities of purchasing durables increase by 2.0 per cent-4.4 per cent, which support the precautionary saving theory and the Buffer-Stock saving theory. Originality/value – Unlike previous studies, the authors focus on the effects of medical insurance on the consumption of durables, which have a big weight in household wealth and are more sensitive to income uncertainty.

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Bibliographic Info

Article provided by Emerald Group Publishing in its journal China Agricultural Economic Review.

Volume (Year): 4 (2012)
Issue (Month): 2 (May)
Pages: 176-187

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Handle: RePEc:eme:caerpp:v:4:y:2012:i:2:p:176-187

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Related research

Keywords: China; Consumer behaviour; Durables consumption; Medical insurance; Panel binary choice model; Rural regions;

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References

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  1. Deaton, Angus, 1991. "Saving and Liquidity Constraints," Econometrica, Econometric Society, vol. 59(5), pages 1221-48, September.
  2. Jonathan Gruber & Aaron S. Yelowitz, 1998. "Public Health Insurance and Private Savings," JCPR Working Papers 42, Northwestern University/University of Chicago Joint Center for Poverty Research.
  3. Wagstaff, Adam & Pradhan, Menno, 2005. "Health insurance impacts on health and nonmedical consumption in a developing country," Policy Research Working Paper Series 3563, The World Bank.
  4. Chou, Shin-Yi & Liu, Jin-Tan & Hammitt, James K., 2003. "National Health Insurance and precautionary saving: evidence from Taiwan," Journal of Public Economics, Elsevier, vol. 87(9-10), pages 1873-1894, September.
  5. Xiaoyun Sun & Sukhan Jackson & Gordon Carmichael & Adrian C. Sleigh, 2009. "Catastrophic medical payment and financial protection in rural China: evidence from the New Cooperative Medical Scheme in Shandong Province," Health Economics, John Wiley & Sons, Ltd., vol. 18(1), pages 103-119.
  6. Stephen Zeldes, . "Optimal Consumption with Stochastic Income: Deviations from Certainty Equivalence," Rodney L. White Center for Financial Research Working Papers 20-86, Wharton School Rodney L. White Center for Financial Research.
  7. Christopher D. Carroll, 1992. "The Buffer-Stock Theory of Saving: Some Macroeconomic Evidence," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(2), pages 61-156.
  8. Kantor, Shawn Everett & Fishback, Price V, 1996. "Precautionary Saving, Insurance, and the Origins of Workers' Compensation," Journal of Political Economy, University of Chicago Press, vol. 104(2), pages 419-42, April.
  9. J. A. Hausman, 1976. "Specification Tests in Econometrics," Working papers 185, Massachusetts Institute of Technology (MIT), Department of Economics.
  10. Eric M. Engen & Jonathan Gruber, 1995. "Unemployment Insurance and Precautionary Saving," NBER Working Papers 5252, National Bureau of Economic Research, Inc.
  11. Wagstaff, Adam, 2007. "The economic consequences of health shocks: Evidence from Vietnam," Journal of Health Economics, Elsevier, vol. 26(1), pages 82-100, January.
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Cited by:
  1. Fang, Xiangming & Jing, Ruiwei & Zeng, Guang & Linnan, Huan Wan & Zhu, Xu & Linnan, Michael, 2014. "Socioeconomic status and the incidence of child injuries in China," Social Science & Medicine, Elsevier, vol. 102(C), pages 33-40.

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