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Health insurance and consumption: Evidence from China’s New Cooperative Medical Scheme

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  • Bai, Chong-En
  • Wu, Binzhen

Abstract

We exploit a quasi-natural experiment arising from the introduction of a health insurance program in rural China to examine how the insurance coverage affects household consumption. Results show that, on average, the health insurance coverage increases nonmedical-related consumption by more than 5%. This insurance effect is observed even in households with no out-of-pocket medical spending. In addition, the insurance effect is stronger in households with worse self-reported health status. These results are consistent with the precautionary savings argument. The insurance effect also varies by household experience with the program. In particular, the effect is significant only in villages where some households have actually obtained reimbursement from the insurance program. The program within these villages stimulates less consumption among new participants than among households that have participated in the program for more than a year.

Suggested Citation

  • Bai, Chong-En & Wu, Binzhen, 2014. "Health insurance and consumption: Evidence from China’s New Cooperative Medical Scheme," Journal of Comparative Economics, Elsevier, vol. 42(2), pages 450-469.
  • Handle: RePEc:eee:jcecon:v:42:y:2014:i:2:p:450-469
    DOI: 10.1016/j.jce.2013.07.005
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    Cited by:

    1. repec:spr:empeco:v:53:y:2017:i:3:d:10.1007_s00181-016-1154-9 is not listed on IDEAS
    2. Liu, Kai, 2016. "Insuring against health shocks: Health insurance and household choices," Journal of Health Economics, Elsevier, vol. 46(C), pages 16-32.
    3. repec:wsi:jicepx:v:08:y:2017:i:01:n:s1793993317500028 is not listed on IDEAS
    4. repec:bla:buecrs:v:68:y:2016:i:s1:p:146-170 is not listed on IDEAS
    5. Aida Caldera Sánchez & Alain de Serres & Naomitsu Yashiro, 2016. "Reforming in a difficult macroeconomic context: A review of the issues and recent literature," OECD Economics Department Working Papers 1297, OECD Publishing.
    6. repec:bla:ijhplm:v:32:y:2017:i:3:p:240-253 is not listed on IDEAS
    7. Qu, Zhaopeng & Zhao, Zhong, 2017. "Glass ceiling effect in urban China: Wage inequality of rural-urban migrants during 2002–2007," China Economic Review, Elsevier, vol. 42(C), pages 118-144.
    8. Qu, Zhaopeng & Zhao, Zhong, 2016. "The Glass ceiling effect in urban China: Wage inequality of rural-urban migrants," MERIT Working Papers 069, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).

    More about this item

    Keywords

    Precautionary savings; Health insurance; Consumption; New Cooperative Medical Scheme; Chinese savings;

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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