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Does Health Insurance Coverage Influence Household Financial Portfolios? A Case Study in Urban China

Author

Listed:
  • Qin Zhou

    (School of Public Administration, University of International Business and Economics, Beijing 100029, China)

  • Kisalaya Basu

    (Health Canada, Brooke Claxton Building, AL-0908B, Tunney¡¯s Pasture 70 Colombine Driveway, Ottawa, Ontario KIA0K9, Canada)

  • Yan Yuan

    (Research Institute of Economics and Finance (RIEM), Southwestern University of Finance and Economics (SWUFE), Chengdu 611131, China)

Abstract

Health insurance lowers the medical financial burden of the insured through a risk-sharing mechanism, and more importantly, reduces the motivation for precautionary saving. This paper explores the relationship between health insurance coverage and household financial portfolios. We choose 2002 urban China as a case study when the health insurance system had a problem of limited adverse selection. Using data from the 2002 Chinese Household Income Project Survey, we find that health insurance coverage influences households¡¯ preference for financial assets, especially for the risky financial assets. These effects become more pronounced as the coverage rate of health insurance in the family increases. Our results are consistent with precautionary saving theory which suggests that future expenditure risk could affect household asset portfolios. Therefore, development of social security or a health insurance system could effectively promote the development of financial markets, especially riskier aspects of financial markets.

Suggested Citation

  • Qin Zhou & Kisalaya Basu & Yan Yuan, 2017. "Does Health Insurance Coverage Influence Household Financial Portfolios? A Case Study in Urban China," Frontiers of Economics in China-Selected Publications from Chinese Universities, Higher Education Press, vol. 12(1), pages 94-112, March.
    • Handle: RePEc:fec:journl:v:12:y:2017:i:1:p:94-112
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    File URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-006-017-0005-7
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    Cited by:

    1. Xinxin Ma, 2022. "Social Insurances and Risky Financial Market Participation: Evidence from China," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 58(10), pages 2957-2975, August.

    More about this item

    Keywords

    health insurance; financial portfolio; risk exposure; precautionary saving;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

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