Comparative Analysis of Farm Households on Financing Medical Care in Rural China

Hua-shu Wang, Henk Moll and Sheng-gen Fan

Chinese Economy, 2008, vol. 41, issue 6, 56-74

Abstract: Farm households in developing countries commonly stabilize uneven consumption by selling physical assets or borrowings from informal financial networks. Gaps left by market failure or uncertainty generally drive unfortunate households to severe financial risk. Under financial shock from unpredictable expenditures, the livelihood of farm households deteriorate. This analysis of the problems of financing medical care expenditures in rural China asks how farm households finance their medical care expendituresâby internal financing, such as savings, or by external financing, such as liabilities. An empirical survey of 793 farm households in three sample villages in Guizhou province, southwestern China, found that the unpredictability of medical care expenses made informal loans the dominant method for financing medical care. It seems likely that extending the social security system to rural medical treatment and health care will relieve the burden of medical expenses on farm households, thus mitigating their financial stress and improving their financial condition in production and consumption.

Date: 2008
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