Can Health Insurance Mitigate Shocks to Consumption? Evidence from China

Posted: 17 Jun 2007

See all articles by Phil Brown

Phil Brown

GeoSource Capital Solutions

Alan de Brauw

International Food Policy Research Institute (IFPRI)

Yang Du

Chinese Academy of Social Sciences (CASS)

Date Written: July 2007


Households in developing countries are more susceptible to risk than households in developed countries (Bardhan and Udry, 2001): because insurance markets tend to be underdeveloped or non-existent, households that experience economic shocks tend to either draw down their asset base, leading to asset-based poverty traps (Carter and Barrett, 2005), or decrease their consumption. In this paper, we analyze whether China's New Rural Cooperative Medical System (NCMS) has affected the way that rural Chinese households deal with economic shocks. The NCMS is intended to protect China's 800 million farmers from catastrophic health shocks by providing baseline coverage. Introduced in 2002, the program is being made available in more counties each year to meet a goal of national coverage by 2010. The program is voluntary, although households pay a nominal fee to participate. Our recently-collected data from 1500 rural households in two Chinese provinces include three important advantages. First, households were chosen from the National Bureau of Statistics sampling frame, so detailed consumption data are available over time. Second, the survey includes detailed information about health shocks over the past year. Third, survey respondents include households who participate in the NCMS program, those that choose not to participate, and those who are unable to participate because they live in counties that have not yet introduced NCMS programs. Using propensity score matching, we assess the extent to which NCMS participation mitigates health shocks to consumption.

Keywords: insurance, health shocks, consumption, China

JEL Classification: I1, I3, O2

Suggested Citation

Brown, Phil and de Brauw, Alan and Du, Yang, Can Health Insurance Mitigate Shocks to Consumption? Evidence from China (July 2007). iHEA 2007 6th World Congress: Explorations in Health Economics Paper, Available at SSRN:

Phil Brown (Contact Author)

GeoSource Capital Solutions ( email )

PO Box 535
Charles Town, WV 25414
United States

Alan De Brauw

International Food Policy Research Institute (IFPRI) ( email )

1201 Eye St, NW,
Washington, DC 20005
United States

Yang Du

Chinese Academy of Social Sciences (CASS) ( email )

Beijing, 100732

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