Health insurance and precautionary saving: a structural analysis

Minchung Hsu

MPRA Paper from University Library of Munich, Germany

Abstract: Starr-McCluer (1996) documented an empirical finding that the US households covered by health insurance saved more than those without coverage, which is inconsistent with the standard consumption-saving theory. This study provides a structural analysis and suggests that institutional factors, in particular, a social insurance (safety net) system and an employment-based health insurance system, can account for this puzzling finding. A dynamic stochastic general equilibrium model is built that incorporates these two institutions with heterogeneous agents making decisions regarding saving, labor supply and health insurance endogenously when they are young. The model, in which agents save in a precautionary manner, can generate Starr-McCluer's empirical finding and it indicates that the empirical finding is not inconsistent with the standard theory of saving under uncertainty. Counterfactual experiments are performed to provide implications for empirical analyses and illustrate the danger of empirical work without a sound theoretical background.

Keywords: Precautionary Savings; Social Insurance; Employment-based Health Insurance (search for similar items in EconPapers)
JEL-codes: E21 I38 (search for similar items in EconPapers)
Date: 2011
New Economics Papers: this item is included in nep-dge, nep-hea and nep-ias
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Related works:
Journal Article: Health Insurance and Precautionary Saving: A Structural Analysis (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:32975

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