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Impact of Health Insurance on Consumption and Saving Behaviours: Evidence from Rural China

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  • Cheung, Diana
  • Padieu, Ysaline
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    Abstract

    By reducing risk on income, health insurance may reduce household precautionary behaviours and boost consumption. This paper evaluates the impact of a subsidized public health insurance scheme designed for rural residents, the New Cooperative Medical Scheme (NCMS), on consumption and saving behaviours in rural China. To do so, we use socioeconomic and demographic data from the China Health and Nutrition Survey and implement OLS, IV and Propensity Score Matching. We find that NCMS helps lowering household savings by enhancing total consumption expenditures, in particular food consumption and bride expenses with OLS and IV estimations. However, when we implement a propensity score matching coupled with a difference-in-difference approach to control for time-invariant unobservables, these results no longer hold. Thus, the scheme does not have a disincentive effect on savings nor an incentive effect on consumption, suggesting that the implementation of the insurance is too recent in 2006 to be trusted by rural Chinese households, to reduce income risk and enable them to lower their precautionary savings. --

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    Bibliographic Info

    Paper provided by Verein für Socialpolitik, Research Committee Development Economics in its series Proceedings of the German Development Economics Conference, Berlin 2011 with number 18.

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    Date of creation: 2011
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    Handle: RePEc:zbw:gdec11:18

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    Keywords: Rural China; New Cooperative Medical Scheme; Saving; Consumption Propensity Score Matching; Difference-in-Difference;

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    1. 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.
    2. Glenn R. Hubbard & Jonathan Skinner & Stephen P. Zeldes, . "Precautionary Saving and Social Insurance," Rodney L. White Center for Financial Research Working Papers 3-95, Wharton School Rodney L. White Center for Financial Research.
    3. Yuyu Chen & Ginger Zhe Jin, 2010. "Does Health Insurance Coverage Lead to Better Health and Educational Outcomes? Evidence from Rural China," NBER Working Papers 16417, National Bureau of Economic Research, Inc.
    4. Shang-Jin Wei & Xiaobo Zhang, 2009. "The Competitive Saving Motive: Evidence from Rising Sex Ratios and Savings Rates in China," NBER Working Papers 15093, National Bureau of Economic Research, Inc.
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    6. Wagstaff, Adam & Lindelow, Magnus & Jun, Gao & Ling, Xu & Juncheng, Qian, 2009. "Extending health insurance to the rural population: An impact evaluation of China's new cooperative medical scheme," Journal of Health Economics, Elsevier, vol. 28(1), pages 1-19, January.
    7. Zhang, Xiaobo & Kanbur, Ravi, 2005. "Spatial inequality in education and health care in China," China Economic Review, Elsevier, vol. 16(2), pages 189-204.
    8. Dong, Keyong, 2009. "Medical insurance system evolution in China," China Economic Review, Elsevier, vol. 20(4), pages 591-597, December.
    9. Antonio Trujillo & Jorge Portillo & John Vernon, 2005. "The Impact of Subsidized Health Insurance for the Poor: Evaluating the Colombian Experience Using Propensity Score Matching," International Journal of Health Care Finance and Economics, Springer, vol. 5(3), pages 211-239, September.
    10. Steven Barnett & Ray Brooks, 2010. "China: Does Government Health and Education Spending Boost Consumption?," IMF Working Papers 10/16, International Monetary Fund.
    11. Jean-Paul Fitoussi & Francesco Saraceno, 2008. "The Intergenerational Content of Social Spending: Health Care and Sustainable Growth in China," Documents de Travail de l'OFCE 2008-27, Observatoire Francais des Conjonctures Economiques (OFCE).
    12. Heckman, James J & Ichimura, Hidehiko & Todd, Petra E, 1997. "Matching as an Econometric Evaluation Estimator: Evidence from Evaluating a Job Training Programme," Review of Economic Studies, Wiley Blackwell, vol. 64(4), pages 605-54, October.
    13. Edwin Leuven & Barbara Sianesi, 2003. "PSMATCH2: Stata module to perform full Mahalanobis and propensity score matching, common support graphing, and covariate imbalance testing," Statistical Software Components S432001, Boston College Department of Economics, revised 19 Jul 2012.
    14. 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.
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