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Health insurance, risk attitudes, and household financial behavior

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  • Zhongda Li
  • Lu Liu
  • Jiayu Shi
  • Yubing Sui

Abstract

Medical expenditure risk is widely believed to reduce households' willingness to bear other risks and in turn alter their behavior. In this paper, we investigate the role of health insurance in household financial decision. To this end, we consider a double‐multinomial discrete‐factor model of insurance choice and portfolio allocation. Using data from a Chinese household survey, we find that enrolling in a health insurance scheme with better policies is associated with a higher probability of owning risky assets. This positive effect is stronger for households with lower risk aversion. Our findings suggest that risk attitudes could indirectly influence portfolio outcomes through affecting households' responsiveness to changes in medical expenditure risk.

Suggested Citation

  • Zhongda Li & Lu Liu & Jiayu Shi & Yubing Sui, 2021. "Health insurance, risk attitudes, and household financial behavior," Health Economics, John Wiley & Sons, Ltd., vol. 30(5), pages 1239-1246, May.
    • Handle: RePEc:wly:hlthec:v:30:y:2021:i:5:p:1239-1246
    DOI: 10.1002/hec.4235
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    References listed on IDEAS

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    2. Boto-García, David & Bucciol, Alessandro, 2023. "Couple and individual willingness to take risks," Journal of Economic Psychology, Elsevier, vol. 99(C).
    3. Inmaculada Aguiar-Díaz & María Victoria Ruiz-Mallorqui, 2022. "Private Health Insurance and Financial Risk Taking in Spain—The Moderating Effect of Subjective Risk Tolerance," IJERPH, MDPI, vol. 19(23), pages 1-13, December.

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