How China's Rural Health Program Lifted Incomes: Evidence from 800 Million Beneficiaries

This study evaluates the economic impact of the New Rural Cooperative Medical Scheme in China, the world's largest rural public health program, covering over 800 million rural residents. Using longitudinal survey data from villages that gained access to the program in different years, we find that the program improved the probability of being in good health by 4.4% to 8.2% across age groups. For the average participating household, per capita income increased by 20.3% over a decade, driven primarily by greater off-farm labor participation and higher wages, alongside significant agricultural income growth. The aggregate income gains were six times the government's program investments. These effects can be replicated by a structural model that characterizes the health investments and labor allocation of utility-maximizing rural residents. Counterfactual analyses based on the structural model suggest that China could further increase the program's benefits by raising the reimbursement rate up to 0.8 (but not beyond). Additionally, eliminating the current cross-province reimbursement constraints would further boost income gains by 18.7%.