Kai Liu: Dept. of Economics, Norwegian School of Economics and Business Administration, Postal: NHH , Department of Economics, Helleveien 30, N-5045 Bergen, Norway
Abstract: I estimate the effects of public health insurance on consumption smoothing and investigate the extent to which the public insurance interacts with private arrangements of self-insurance. Exploiting a dramatic expansion in health insurance coverage in rural China, I find that the introduction of public health insurance helps households completely insure against severe health shocks. The health insurance also reduces the magnitude of decline during a health shock in investments in children's education, agricultural activities and durable goods. The evidence suggests that the benefit of social insurance for low-income households could also come from reducing the use of costly smoothing mechanisms.
32 pages, October 24, 2013
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