Abstract
China has implemented drastic reforms in social health insurance within the past decade. I investigate how social health insurance affects economic growth in China by employing a three-period overlapping generations’ model in which social health insurance is determined endogenously. My model consists of three parts: individuals, firms and the government. In my model, social health insurance influences savings, physical capital, human capital and economic growth. I find that the higher the contribution rates of individual accounts to social health insurance, the lower the personal savings rate; with an increase in the personal account payment rate, an increase in the payment rate is associated with an increase in personal account funds, and the medical expenditure will increase; the contribution of each monetary unit will lead to more than one monetary unit of output, representing the multiplier effect of the personal account payment rate on economic growth. So the contribution rates of personal accounts are conducive to physical and human capital accumulation, generating a multiplier effect on economic growth. Simulation results show that a lower rate of pooled account payments and higher rate of personal account payments result in greater economic growth. I also find that the proportion of employment payments transferred to personal accounts positively influences economic growth. The theoretical model and simulation indicate that the reform of social health insurance causes an increase in economic growth.
Highlights
China has implemented drastic reforms in social health insurance within the past decade
This study intends to answer the following questions: Does social health insurance promote economic growth? What is the path of social health insurance on economic growth? How can China's social health insurance reform promote economic growth? In this paper, I study the interdependence of social health insurance, consumption, medical expenditure, health capital, physical capital, and economic development using an overlapping generation’s model of two-period lived agents
Research on the relationship between physical capital, human capital, and economic growth began with North [5]
Summary
China has implemented drastic reforms in social health insurance within the past decade. Social health insurance can provide financial accessibility for people in the event of illness [1]; it influences family constraints and economic incentives, which in turn affect consumption, savings, and other microeconomic decision factors [2,3,4] These factors influence the accumulation of physical capital and human capital, which shape the overall economy. Social health insurance is designed to maintain fairness and social welfare as a major public policy and exerts a profound influence on all aspects of social life This form of insurance informs personal savings, consumption, and investment in microeconomic decisions by changing insured individuals’ budgetary constraints (and welfare and status), which influences economic operations via the accumulation of physical capital and human capital, inevitably affecting economic growth. I study the interdependence of social health insurance, consumption, medical expenditure, health capital, physical capital, and economic development using an overlapping generation’s model of two-period lived agents.
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