Health Insurance and Consumption: Evidence from China’s New Cooperative Medical Scheme

49 Pages Posted: 18 Jun 2011 Last revised: 24 Oct 2014

See all articles by Chong-En Bai

Chong-En Bai

Tsinghua University - School of Economics & Management

Binzhen Wu

Tsinghua University - School of Economics & Management

Date Written: April 16, 2013

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 percent. This insurance effect is observed even in households with no out-of-pocket medical spending. In addition, the insurance effect is stronger in poorer households and 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.

Keywords: Precautionary savings, Health insurance, Consumption, New Cooperative Medical Scheme, Chinese savings

JEL Classification: D12, D91, E21, I18

Suggested Citation

Bai, Chong-En and Wu, Binzhen, Health Insurance and Consumption: Evidence from China’s New Cooperative Medical Scheme (April 16, 2013). Available at SSRN: https://ssrn.com/abstract=1865821 or http://dx.doi.org/10.2139/ssrn.1865821

Chong-En Bai

Tsinghua University - School of Economics & Management ( email )

Beijing, 100084
China

Binzhen Wu (Contact Author)

Tsinghua University - School of Economics & Management ( email )

School of Economics and Management
Tsinghua University
Beijing, Beijing 100084
China

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