Health Shocks, Village Elections, and Long-Term Income: Evidence from Rural China
AbstractUsing a sample of households in 48 Chinese villages for the period 1986-2002, this paper studies the dynamic effects of major health shocks on household income and the role played by village elections in mitigating these effects. Our results show that in the first 15 years after a shock, a shock-hit household on average falls short of its normal income trajectory by 11.8% and its recovery would take 19 years. Based on the premise that shock-hit families impose negative externalities on richer families by borrowing from them, our political economy model predicts that the outcome of village elections would differ from that of a standard median voter model in that the elected village leaders tend to adopt pro-poor policies. Our empirical study finds that villages are more likely to establish a healthcare plan after the election is introduced. In addition, village elections reduce the probability of a household to borrow by 16.7% when one of its working adults is seriously sick. As a result, they reduce more than half of the negative effect of a health shock on household income.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12686.
Date of creation: Nov 2006
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Note: HE LS PE
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Find related papers by JEL classification:
- I12 - Health, Education, and Welfare - - Health - - - Health Production
- O15 - Economic Development, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
- Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Social and Economic Stratification
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-11-18 (All new papers)
- NEP-CNA-2006-11-18 (China)
- NEP-DEV-2006-11-18 (Development)
- NEP-HEA-2006-11-18 (Health Economics)
- NEP-POL-2006-11-18 (Positive Political Economics)
- NEP-SEA-2006-11-18 (South East Asia)
- NEP-TRA-2006-11-18 (Transition Economics)
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- Shen, Yan & Yao, Yang, 2008. "Does grassroots democracy reduce income inequality in China?," Journal of Public Economics, Elsevier, vol. 92(10-11), pages 2182-2198, October.
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