Economics at your fingertips  

The macroeconomic and welfare implications of rural health insurance and pension reforms in China

Neha Bairoliya, David Canning (), Ray Miller and Akshar Saxena ()

The Journal of the Economics of Ageing, 2018, vol. 11, issue C, 71-92

Abstract: We assess the potential impact of rural health insurance and pension reforms on macroeconomic outcomes and social welfare in a dynamic general equilibrium model calibrated to the Chinese economy. We analyze transition paths as well as steady state responses to the new policies. The current reforms in China provide modest rural pensions and reimbursement of a portion of healthcare costs, but at rates that are substantially lower than are already in place in the urban sector. We investigate the potential effect of raising the rural benefit rates to those enjoyed in the urban sector. While both reforms reduce income per capita, we show that the health insurance reforms are potentially welfare improving if they are implemented in a way that leads to reduced out-of-pocket health spending. The welfare gains are driven by rural health insurance providing relief from the risk of catastrophic medical expenditures that can wipe out household savings and force long working hours. A pay-as-you-go rural pension results in a welfare gain in the short-run but welfare loss in the long-run due to the distorting effects of taxes. Despite an increase in required financing due to an aging population, the welfare impact of rural health insurance remains positive when incorporating the projected old-age dependency ratio for the year 2050. However, a pay-as-you-go rural pension creates large income and welfare losses with 2050 demographics.

Keywords: China; Health; Aging; Healthcare; Pension (search for similar items in EconPapers)
JEL-codes: E62 H55 I13 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9) Track citations by RSS feed

Downloads: (external link)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

DOI: 10.1016/j.jeoa.2017.01.004

Access Statistics for this article

The Journal of the Economics of Ageing is currently edited by D.E. Bloom, A. Sousa-Poza and U. Sunde

More articles in The Journal of the Economics of Ageing from Elsevier
Bibliographic data for series maintained by Haili He ().

Page updated 2020-06-25
Handle: RePEc:eee:joecag:v:11:y:2018:i:c:p:71-92