Qin Zhou, Kisalaya Basu, Yan Yuan

Author information

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

b Health Canada, Brooke Claxton Building, AL-0908B, Tunney’s Pasture 70 Colombine Driveway, Ottawa, Ontario KIA0K9, Canada

c 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.

Keywords

health insurance, financial portfolio, risk exposure, precautionary saving

Cite this article

Qin Zhou, Kisalaya Basu, Yan Yuan. Does Health Insurance Coverage Influence Household Financial Portfolios? A Case Study in Urban China. Front. Econ. China, 2017, 12(1): 94‒112 https://doi.org/10.3868/s060-006-017-0005-7