Insuring Against Health Shocks: Health Insurance and Household Choices

42 Pages Posted: 4 Sep 2015

See all articles by Kai Liu

Kai Liu

Norwegian School of Economics (NHH)

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This paper provides empirical evidence on the role of public health insurance in mitigating adverse outcomes associated with health shocks. Exploiting the rollout of a universal health insurance program in rural China, I find that total household income and consumption are fully insured against health shocks even without access to health insurance. Household labor supply is an important insurance mechanism against health shocks. Access to health insurance helps households to maintain investment in children's human capital during negative health shocks, which suggests that one benefit of health insurance could arise from reducing the use of costly smoothing mechanisms.

Keywords: China, health insurance, health shock

JEL Classification: D1, O1, I1

Suggested Citation

Liu, Kai, Insuring Against Health Shocks: Health Insurance and Household Choices. IZA Discussion Paper No. 9094. Available at SSRN:

Kai Liu (Contact Author)

Norwegian School of Economics (NHH) ( email )

Helleveien 30

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