Scandinavian Working Papers in Economics

Discussion Paper Series in Economics,
Norwegian School of Economics, Department of Economics

No 16/2013: Health Insurance Coverage for Low-income Households: Consumption Smoothing and Investment.

Kai Liu ()
Additional contact information
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.

Keywords: Public health insurance; Rural China

JEL-codes: D10; I10; O10

32 pages, October 24, 2013

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