Heterogeneity of the Effects of Health Insurance on Household Savings: Evidence from Rural China

Abstract

We estimate the impact of the New Cooperative Medical Scheme (NCMS) on household savings by income quartiles in rural China. We control for endogenous NCMS participation with an instrumental variable strategy using the China Health and Nutrition survey. We find that NCMS has a negative impact on middle-income savings but does not affect the poorest participants. NCMS also decreases richest participants’ savings, when they do not benefit from other health programs. Thus, the implementation of a health care scheme appears to be an appropriate tool to lower savings and boost consumption and so sustain economic growth.