Effects of National Health Insurance on Precautionary Saving: New Evidence from Taiwan

Abstract

In this paper we evaluate the crowd-out effects of the National Health Insurance (NHI) on household precautionary saving in Taiwan. Our analysis differs from existing studies in two respects. First, we do not exclude the households with negative saving which are about one sixth of the entire sample. Second, we conduct a more complete treatment effect analysis. We estimate both average treatment effect (ATE) and quantile treatment effect (QTE) using the difference-in-differences method. We also partition some covariates (household permanent income and the age of household head) into different groups and estimate the groupwise ATEs and QTEs. While supporting the finding that the NHI has negative impact on households saving, our empirical result shows that the QTE is heterogeneous across saving quantiles, such that higher savers tend to have greater reduction in saving after the NHI is enforced. It is also found that the NHI has greater impact on the households with lower income and those with retiring heads, especially on high savers in these groups.