Health Insurance, the Social Welfare System and Household Saving

Minchung Hsu

MPRA Paper from University Library of Munich, Germany

Abstract: This paper studies the factors that can generate the puzzling saving phenomenon in the US: 1) Starr-McCluer (1996) finds that households covered by private health insurance save more than comparable households without coverage, even when controlling for other variables. 2) The asset holding ratio of the insured to the uninsured decreases with increased income level. This paper suggests that institutional factors, in particular, a means-tested social welfare system and an employmentbased health insurance system, can account for the phenomenon. I develop a dynamic equilibrium model, and show that the model economy presents the same saving pattern as in the US and that the empirical finding as in Starr-McCluer (1996) is replicated. Implications for empirical approaches to testing the precautionary saving hypothesis are also provided.

Keywords: Precautionary Saving; Means-tested Social Welfare; Employment-based Health Insurance. (search for similar items in EconPapers)
JEL-codes: D52 E21 I38 (search for similar items in EconPapers)
Date: 2008, Revised 2010
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Citations: View citations in EconPapers (2)

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