Hsu, Minchung (2008): Health Insurance, the Social Welfare System and Household Saving.
Download (193Kb) | Preview
This paper studies the factors that can generate the puzzling saving phenomenon in the US: 1) Starr-McCluer (1996) finds that households covered by private health insurance save more than comparable households without coverage, even when controlling for other variables. 2) The asset holding ratio of the insured to the uninsured decreases with increased income level. This paper suggests that institutional factors, in particular, a means-tested social welfare system and an employmentbased health insurance system, can account for the phenomenon. I develop a dynamic equilibrium model, and show that the model economy presents the same saving pattern as in the US and that the empirical finding as in Starr-McCluer (1996) is replicated. Implications for empirical approaches to testing the precautionary saving hypothesis are also provided.
|Item Type:||MPRA Paper|
|Original Title:||Health Insurance, the Social Welfare System and Household Saving|
|Keywords:||Precautionary Saving, Means-tested Social Welfare, Employment-based Health Insurance.|
|Subjects:||I - Health, Education, and Welfare > I3 - Welfare and Poverty > I38 - Government Policy; Provision and Effects of Welfare Programs
D - Microeconomics > D5 - General Equilibrium and Disequilibrium > D52 - Incomplete Markets
E - Macroeconomics and Monetary Economics > E2 - Macroeconomics: Consumption, Saving, Production, Employment, and Investment > E21 - Consumption; Saving; Wealth
|Depositing User:||Hsu Minchung|
|Date Deposited:||12. Mar 2010 00:37|
|Last Modified:||02. Mar 2013 04:25|
Aiyagari, S. Rao (1994), “Uninsured idiosyncratic risk and aggregate saving.” Quarterly Journal of Economics,109:3, 659–684.
Chou, S., J. Liu and J. Hammitt (2003), “National Health Insurance and Precautionary Saving: Evidence from Taiwan.” Journal of Public Economics, 87: 1873–1894.
Chou, S., J. Liu and C. J. Huang (2004), “Health Insurance and Savings Over the Life Cycle – A Semiparametric Smooth Coefficient Estimation.” Journal of Applied Econometrics, 19: 295–322.
De Nardi, Mariacristina, Eric French, and John Bailey Jones (2006), “Differential Mortality, Uncertain Medical Expenses, and the Saving of Elderly Singles.” NBER Working Paper No. 12554.
Feenberg, D. and J. Skinner (1994), “The Risk and Duration of Catastrophic Health Care Expenditures.” Review of Economics and Statistics, 76:4, 633–647.
Gruber, J. and A. Yelowitz (1999), “Public Health Insurance and Private Savings.” Journal of Political Economy, 107:6, 1249–1274.
Guariglia, A. and M. Rossi (2004), “Private medical insurance and saving: evidence from the British Household Panel Survey.” Journal of Health Economics, 23:4, 761– 783.
Hansen, Gary D. (1985), “Indivisible labor and the business cycle.” Journal of Monetary Economics, 16:3, 309–327.
Hubbard, R. G., J. Skinner and S. P. Zeldes (1995), “Precautionary saving and social insurance.” Journal of Political Economy, 103, 360–399. Leland, H. E. (1968), “Saving and Uncertainty: The Precautionary Demand for Saving.” Quarterly Journal of Economics, 82:3, 465-473.
Ljungqvist, L. and T. J. Sargent (2000), Recursive Macroeconomic Theory, Cambridge, Mass: MIT Press.
Kotlikoff, L. J. (1989), “Health expenditures and precautionary savings.” What Determines Savings? by L. J. Kotlikoff, Cambridge, Mass: MIT Press.
Maynard, Alex and Jiaping Qiu (2005), “Public insurance and private savings: who is affected and by how much?” Working Paper.
McGarry, Kathleen (2002), “Public Policy and the US Health Insurance Market: Direct and Indirect Provision of Insurance.” National Tax Journal, LV:4, 789–827.
Monheit, Alan C. (2003), “Persistence in Health Expenditures in the Short Run: Prevalence and Consequences.” Medical Care, 41:7, 53–64.
Powers, E. T. (1998), “Does Means-TestingWelfare Discourage Saving? Evidence from a Change in AFDC Policy in the United States.” Journal of Public Economics, 68: 33–53
Sandmo, A. (1970), “The Effect of Uncertainty on Saving Decisions.” Review of Economic Studies, 37, 353-360.
Starr-McCluer, Martha (1996), “Health Insurance and Precautionary Savings.” American Economic Review, 86:1, 258–295.
Swartz, K. (2003), “Reinsuring Risk to Increase Access to Health Insurance.” American Economic Review, 93:2, 283–287.