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Health Insurance, the Social Welfare System and Household Saving

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  • Hsu, Minchung

Abstract

This paper studies the factors that can generate the puzzling saving phenomenon in the US: 1) Starr-McCluer (1996) finds that households covered by private health insurance save more than comparable households without coverage, even when controlling for other variables. 2) The asset holding ratio of the insured to the uninsured decreases with increased income level. This paper suggests that institutional factors, in particular, a means-tested social welfare system and an employmentbased health insurance system, can account for the phenomenon. I develop a dynamic equilibrium model, and show that the model economy presents the same saving pattern as in the US and that the empirical finding as in Starr-McCluer (1996) is replicated. Implications for empirical approaches to testing the precautionary saving hypothesis are also provided.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 21281.

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Date of creation: 2008
Date of revision: 2010
Handle: RePEc:pra:mprapa:21281

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Related research

Keywords: Precautionary Saving; Means-tested Social Welfare; Employment-based Health Insurance.;

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References

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  1. Martha Starr-McCluer, 1994. "Health insurance and precautionary saving," Finance and Economics Discussion Series 94-10, Board of Governors of the Federal Reserve System (U.S.).
  2. McGarry, Kathleen, 2002. "Public Policy and the U.S. Health Insurance Market: Direct and Indirect Provision of Insurance," National Tax Journal, National Tax Association, vol. 55(4), pages 789-827, December.
  3. Alex Maynard & Jiaping Qiu, 2009. "Public insurance and private savings: who is affected and by how much?," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 24(2), pages 282-308, 03.
  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. Gary Hansen, 2010. "Indivisible Labor and the Business Cycle," Levine's Working Paper Archive 233, David K. Levine.
  6. Feenberg, Daniel & Skinner, Jonathan, 1994. "The Risk and Duration of Catastrophic Health Care Expenditures," The Review of Economics and Statistics, MIT Press, vol. 76(4), pages 633-47, November.
  7. Glenn R. Hubbard & Jonathan Skinner & Stephen P. Zeldes, . "Precautionary Saving and Social Insurance," Rodney L. White Center for Financial Research Working Papers 03-95, Wharton School Rodney L. White Center for Financial Research.
  8. Jonathan Gruber & Aaron Yelowitz, 1997. "Public Health Insurance and Private Savings," NBER Working Papers 6041, National Bureau of Economic Research, Inc.
  9. Mariacristina De Nardi & Eric French & John Bailey Jones, 2006. "Differential Mortality, Uncertain Medical Expenses, and the Saving of Elderly Singles," 2006 Meeting Papers 46, Society for Economic Dynamics.
  10. S. Rao Aiyagari, 1993. "Uninsured idiosyncratic risk and aggregate saving," Working Papers 502, Federal Reserve Bank of Minneapolis.
  11. Guariglia, Alessandra & Rossi, Mariacristina, 2004. "Private medical insurance and saving: evidence from the British Household Panel Survey," Journal of Health Economics, Elsevier, vol. 23(4), pages 761-783, July.
  12. Katherine Swartz, 2003. "Reinsuring Risk to Increase Access to Health Insurance," American Economic Review, American Economic Association, vol. 93(2), pages 283-287, May.
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Cited by:
  1. Pashchenko, Svetlana & Porapakkarm, Ponpoje, 2011. "Welfare costs of reclassification risk in the health insurance market," MPRA Paper 34189, University Library of Munich, Germany.

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