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Social insurance, private health insurance and individual welfare

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  • Zhao, Kai

Abstract

This paper studies the impact of social insurance on individual choices and welfare in a dynamic general equilibrium model with uncertain medical expenses and individual health insurance choices. I find that social insurance (modeled as the combination of a minimum consumption floor and the Medicaid program) does not only distort saving and labor supply decisions, but also has a large crowding out effect on the demand for private health insurance. However, despite the distorting effects, the net welfare consequence of eliminating social insurance is still negative in most cases. In addition, the large crowding out effect on private health insurance suggests that the existence of social insurance programs may be one reason why some Americans do not buy any health insurance.

Suggested Citation

  • Zhao, Kai, 2017. "Social insurance, private health insurance and individual welfare," Journal of Economic Dynamics and Control, Elsevier, vol. 78(C), pages 102-117.
  • Handle: RePEc:eee:dyncon:v:78:y:2017:i:c:p:102-117
    DOI: 10.1016/j.jedc.2017.03.004
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    Cited by:

    1. Jung, Juergen & Tran, Chung, 2022. "Social health insurance: A quantitative exploration," Journal of Economic Dynamics and Control, Elsevier, vol. 139(C).
    2. Lee, Hyun & Zhao, Kai & Zou, Fei, 2022. "Does the early retirement policy really benefit women?," Journal of Economic Behavior & Organization, Elsevier, vol. 196(C), pages 330-345.
    3. Ayşe İmrohoroğlu & Kai Zhao, 2020. "Household Saving, Financial Constraints, And The Current Account In China," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 61(1), pages 71-103, February.
    4. Feng, Zhigang & Zhao, Kai, 2018. "Employment-based health insurance and aggregate labor supply," Journal of Economic Behavior & Organization, Elsevier, vol. 154(C), pages 156-174.
    5. Wei Jiang & Yadong Wang, 2023. "Asymmetric Effects of Human Health Capital on Economic Growth in China: An Empirical Investigation Based on the NARDL Model," Sustainability, MDPI, vol. 15(6), pages 1-16, March.
    6. Jang, Youngsoo, 2019. "Credit, Default, and Optimal Health Insurance," MPRA Paper 95397, University Library of Munich, Germany.
    7. Youngsoo Jang, 2023. "Credit, Default, And Optimal Health Insurance," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 64(3), pages 943-977, August.
    8. Zhao, Kai, 2015. "The impact of the correlation between health expenditure and survival probability on the demand for insurance," European Economic Review, Elsevier, vol. 75(C), pages 98-111.

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    More about this item

    Keywords

    Saving; Uncertain medical expenses; Health insurance; Means testing;
    All these keywords.

    JEL classification:

    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private

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