Wealth, Medical Spending, and Health: Evidence from a Housing Reform

This paper leverages China’s 2006 housing reform and a non-parametric Regression Discontinuity Design (RDD) to identify the causal impact of housing wealth on health and healthcare spending across age groups. A positive housing wealth shock leads to an increase in out-of-pocket medical expenses of the elderly and children at both the extensive and intensive margins, thereby improving their health. These effects differ across age cohorts, highlighting how positive wealth shocks translate into health improvements through direct spending and private insurance uptake. In contrast, these health effects are not evident among young adults. Overall, the findings indicate that wealth shocks reduce health inequality within vulnerable households. The underlying mechanisms differ by age group: a pure wealth effect for the elderly, precautionary savings incentives for younger adults, and intergenerational investments for children.