Health Insurance, the Social Welfare System and Household Saving

Hsu, Minchung (2008): Health Insurance, the Social Welfare System and Household Saving. Unpublished.

Abstract

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
• Language: English
• 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 - Consumption, Saving, Production, Employment, and Investment > E21 - Macroeconomics: Consumption; Saving; Aggregate Physical and Financial Consumer Wealth

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