Health insurance and savings over the life cycle-a semiparametric smooth coefficient estimation

Shin-Yi Chou, Jin-Tan Liu and Cliff J. Huang
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Shin-Yi Chou: Department of Economics, Lehigh University, USA, and National Bureau of Economics Research, USA, Postal: Department of Economics, Lehigh University, USA, and National Bureau of Economics Research, USA
Cliff J. Huang: Department of Economics, Vanderbilt University, USA, Postal: Department of Economics, Vanderbilt University, USA

Journal of Applied Econometrics, 2004, vol. 19, issue 3, 295-322

Abstract: Individuals save for future uncertain health care expenses. This is less efficient than pooling health risk through insurance. The provision of comprehensive health insurance may raise welfare by providing the missing market to smooth out consumption through the life cycle. We employ a semiparametric smooth coefficient model to examine the effects of the introduction of the National Health Insurance in Taiwan in 1995 on savings and consumption over the life cycle. The idea is to estimate the coefficients of health insurance which vary with age. Our results suggest that younger households are more sensitive to the risk reductions, and that they demonstrate a greater response in the reduction of their precautionary saving. Copyright © 2004 John Wiley & Sons, Ltd.

Date: 2004
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DOI: 10.1002/jae.735

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