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Medical expenditure risk and household portfolios: Evidence from an insurance reform in China

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  • Sun, Sidong
  • Hou, Wenxuan
  • Tan, Shenshen

Abstract

We examine how reductions in medical expenditure risk shape household portfolio choices. Exploiting the 2017 inclusion of cancer treatment drugs in China’s National Basic Medical Insurance Medicine List, we implement a difference-in-differences design comparing high-risk and low-risk insured individuals. The results show that households facing elevated cancer risk became significantly more likely to hold risky assets after the reform. These findings provide novel causal evidence that mitigating health-related background risk encourages financial risk-taking.

Suggested Citation

  • Sun, Sidong & Hou, Wenxuan & Tan, Shenshen, 2025. "Medical expenditure risk and household portfolios: Evidence from an insurance reform in China," Economics Letters, Elsevier, vol. 257(C).
    • Handle: RePEc:eee:ecolet:v:257:y:2025:i:c:s016517652500494x
    DOI: 10.1016/j.econlet.2025.112657
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • I19 - Health, Education, and Welfare - - Health - - - Other

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