Does supplemental private health insurance incentivize household risky financial asset investment? Evidence from the China Household Financial Survey

AbstractPrivate health insurance (PHI) is considered a supplement to public medical insurance schemes in China. To the extent that PHI coverage may offset background risk by decreasing medical expenditure risk, it may also incentivize risky financial behaviors. However, empirical evidence confirming this theory is absent in China. We fill this void by examining the impact of supplemental PHI on household risky financial investment using data from the China Household Financial Survey (CHFS). In the first set of analyses, we used bivariate probit (BVP) models with instrumental variables (IVs) to examine the effects of PHI on the extensive margin of household risky financial investment. In the second set of analyses, we used Tobit models with a two-stage residual inclusion (2SRI) framework to examine the effects of PHI on the corresponding intensive margin. The results indicated that supplemental PHI increased the probability of holding risky financial assets. On top of that, PHI increased the percentage of total financial assets allocated to risky financial investment. Such effects were more pronounced on stocks than on other risky products. Our findings provided evidence that purchasing supplemental PHI in China may increase the risk tolerance of financial investment, and risk attitude is a mediating factor between PHI ownership and risky financial investment behavior.
Source: International Journal of Health Care Finance and Economics - Category: Health Management Source Type: research