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Hilton Atlanta, 224
Chinese Economists Society
Health, Development and Behavior
Friday, Jan. 4, 2019 12:30 PM - 2:15 PM
- Chair: Xi Chen, Yale University
Does Financial Knowledge Alleviate Risk Attitude and Risk Behavior Inconsistency?
AbstractWe investigate the relationship between risk preference and risk behavior using China House- hold Finance Survey (CHFS). Empirical results lend support to the existence of an inconsistency between risk preference and risk behavior. However, financial knowledge seems to help decrease the inconsistency between risk preference and risk behavior. We show that financial knowledge works in two channels. First, it could decrease the inconsistency between risk propensity and risk behavior. Second, it could encourage risky behavior. We also document that the heterogeneous risk sensitivities of households lead to different outcomes. More specifically, financial knowledge increases the inconsistency between risk preference and risk behavior when people are risk averse, and it decreases this inconsistency by increasing risky behavior when people are risk seeking.
Investigation of Service Distortion in China's New Cooperative Medical Scheme
AbstractIn 2003, the Chinese government implemented a nationwide health insurance program called the New Cooperative Medical Scheme (NCMS). The literature has found that this program failed to provide sufficient financial protection. One possible reason is that some insurers undercover the health services that involve significant medical expenses. This study aims to understand the degree of distortion in the NCMS benefit plan and inform program modification to improve the effectiveness. We evaluate the service-level coverage of NCMS through quantifying each service’s shadow price. Based on China Health and Nutrition Survey data, we divide the whole sample into four geographical regions and assess each region’s population health status, distribution of health spending, and shadow prices of different health services. To inform NCMS benefit modification, we investigate the distortion under different risk-adjusted premiums empirically. Our results reveal challenges of financial sustainability faced by the NCMS program, especially in the Northeast region. The NCMS plan tends to undercover the services that are predictable and negatively correlated with plan profits, such as inpatient treatments. We also find that the efficiency of the NCMS can be improved if its risk premiums are adjusted based on individual demographic characteristics and disease history.
- I1 - Health