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Can public medical insurance promote rural entrepreneurship? Evidence from China

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  • Xiaojun Shi
  • Changyun Wang
  • Teng Zhong

Abstract

Using China’s National Cooperative Medical Scheme (NCMS), a heavily subsided public medical insurance (PMI) scheme, aiming at covering all rural populations in China, as a quasi-natural experiment, we find that PMI unleashes entrepreneurship in the rural economy. This finding provides supporting evidence for Arrow’s risk-shifting theory and enriches the literature on the effect of PMI that has focused mainly on health impact and consumption smoothing. We also demonstrate that PMI increases entrepreneurial investments primarily through the channel of wealth effect resulting from reduced out-of-pocket medical expenses. Besides, the entrepreneurship cultivation effect of PMI is more pronounced among rural households that are wealthier, have fuller insurance coverage, or have younger heads.

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  • Xiaojun Shi & Changyun Wang & Teng Zhong, 2021. "Can public medical insurance promote rural entrepreneurship? Evidence from China," Applied Economics, Taylor & Francis Journals, vol. 53(37), pages 4292-4309, August.
    • Handle: RePEc:taf:applec:v:53:y:2021:i:37:p:4292-4309
    DOI: 10.1080/00036846.2021.1899118
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    Cited by:

    1. Liu, Xiao & Burge, Gregory S., 2024. "The effect of the new cooperative medical scheme on rural labor supply in China," China Economic Review, Elsevier, vol. 85(C).
    2. Hayward, Mathew & Cheng, Zhiming & Wang, Haining & Smyth, Russell, 2023. "Parental influence and the propensity for entrepreneurship: Evidence from the one-child policy," Journal of Business Venturing Insights, Elsevier, vol. 20(C).
    3. Wang, Zhenggang & Wu, Zenan & Yuan, Ye, 2024. "We’ve got you covered! The effect of public health insurance on rural entrepreneurship in China," Journal of Public Economics, Elsevier, vol. 235(C).

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