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Health Insurance Coverage for Low-income Households: Consumption Smoothing and Investment

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  • Liu, Kai

    ()
    (Dept. of Economics, Norwegian School of Economics and Business Administration)

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Abstract

I estimate the effects of public health insurance on consumption smoothing and investigate the extent to which the public insurance interacts with private arrangements of self-insurance. Exploiting a dramatic expansion in health insurance coverage in rural China, I find that the introduction of public health insurance helps households completely insure against severe health shocks. The health insurance also reduces the magnitude of decline during a health shock in investments in children's education, agricultural activities and durable goods. The evidence suggests that the benefit of social insurance for low-income households could also come from reducing the use of costly smoothing mechanisms.

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Bibliographic Info

Paper provided by Department of Economics, Norwegian School of Economics in its series Discussion Paper Series in Economics with number 16/2013.

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Length: 32 pages
Date of creation: 24 Oct 2013
Date of revision:
Handle: RePEc:hhs:nhheco:2013_016

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Postal: NHH, Department of Economics, Helleveien 30, N-5045 Bergen, Norway
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Fax: 5595 9100
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Web page: http://www.nhh.no/sam/
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Keywords: Public health insurance; Rural China;

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  1. Song, Lina & Appleton, Simon & Knight, John, 2006. "Why Do Girls in Rural China Have Lower School Enrollment?," World Development, Elsevier, vol. 34(9), pages 1639-1653, September.
  2. Wagstaff, Adam & Lindelow, Magnus & Gao Jun & Xu Ling & Qian Juncheng, 2007. "Extending health insurance to the rural population : an impact evaluation of China's new cooperative medical scheme," Policy Research Working Paper Series 4150, The World Bank.
  3. Jonathan Morduch, 1995. "Income Smoothing and Consumption Smoothing," Harvard Institute of Economic Research Working Papers 1727, Harvard - Institute of Economic Research.
  4. Raj Chetty, 2005. "A General Formula for the Optimal Level of Social Insurance," NBER Working Papers 11386, National Bureau of Economic Research, Inc.
  5. J. Gruber & A. Yelowitz, . "Public Health Insurance and Private Savings," Institute for Research on Poverty Discussion Papers 1135-97, University of Wisconsin Institute for Research on Poverty.
  6. Attanasio, Orazio & Rios-Rull, Jose-Victor, 2000. "Consumption smoothing in island economies: Can public insurance reduce welfare?," European Economic Review, Elsevier, vol. 44(7), pages 1225-1258, June.
  7. Emily Hannum, 2005. "Market transition, educational disparities, and family strategies in rural china: New evidence on gender stratification and development," Demography, Springer, vol. 42(2), pages 275-299, May.
  8. Brown, Philip H. & Park, Albert, 2002. "Education and poverty in rural China," Economics of Education Review, Elsevier, vol. 21(6), pages 523-541, December.
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  10. Rosenzweig, Mark R. & Wolpin, Kenneth I., 1989. "Credit Market Constraints, Consumption Smoothing and the Accumulation of Durable Production Assets in Low-Income Countries: Investments in Bullocks in India," Bulletins 7487, University of Minnesota, Economic Development Center.
  11. Manuela Angelucci & Orazio Attanasio, 2013. "The Demand for Food of Poor Urban Mexican Households: Understanding Policy Impacts Using Structural Models," American Economic Journal: Economic Policy, American Economic Association, vol. 5(1), pages 146-78, February.
  12. Donald Cox & Zekeriya Eser & Emmanuel Jimenez, 1996. "Motives for Private Transfers over the Life Cycle: An Analytical Framework and Evidence for Peru," Boston College Working Papers in Economics 327., Boston College Department of Economics.
  13. Manuela Angelucci & Giacomo De Giorgi, 2009. "Indirect Effects of an Aid Program: How Do Cash Transfers Affect Ineligibles' Consumption?," American Economic Review, American Economic Association, vol. 99(1), pages 486-508, March.
  14. Xiaoyan Lei & Wanchuan Lin, 2009. "The New Cooperative Medical Scheme in rural China: does more coverage mean more service and better health?," Health Economics, John Wiley & Sons, Ltd., vol. 18(S2), pages S25-S46, July.
  15. Cutler, David M & Gruber, Jonathan, 1996. "Does Public Insurance Crowd Out Private Insurance?," The Quarterly Journal of Economics, MIT Press, vol. 111(2), pages 391-430, May.
  16. Kochar, Anjini, 1995. "Explaining Household Vulnerability to Idiosyncratic Income Shocks," American Economic Review, American Economic Association, vol. 85(2), pages 159-64, May.
  17. Amy Finkelstein & Sarah Taubman & Bill Wright & Mira Bernstein & Jonathan Gruber & Joseph P. Newhouse & Heidi Allen & Katherine Baicker, 2012. "The Oregon Health Insurance Experiment: Evidence from the First Year," The Quarterly Journal of Economics, Oxford University Press, vol. 127(3), pages 1057-1106.
  18. Xiaohua Yu & David Abler, 2009. "The Demand for Food Quality in Rural China," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(1), pages 57-69.
  19. Mace, Barbara J, 1991. "Full Insurance in the Presence of Aggregate Uncertainty," Journal of Political Economy, University of Chicago Press, vol. 99(5), pages 928-56, October.
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