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Disease, Health Insurance, and Poverty Reversion in Rural China

Author(s)

Yongyi Li

Affiliation(s)

Department of Economic Statistics, Northwest Normal University, Lanzhou, Gansu, China

Abstract

Using data from the 2018 China Household Income Project (CHIP), this study constructs an identification strategy based on a Recursive Bivariate Probit model to estimate the poverty-inducing effect of illness and the poverty-reducing effect of medical insurance. The results show that, without accounting for medical insurance reimbursement, households experiencing an illness shock have a 0.0824 higher probability of falling into dynamic poverty compared to a counterfactual state without such a shock. When medical reimbursement is included, this elevated probability is 0.0639. The compensation effect of medical reimbursement for illness-induced poverty is thus 22.45%. Furthermore, the effects of illness on poverty and of insurance in reducing poverty exhibit regional heterogeneity. Under comparable conditions, households in western China experience a relatively higher poverty-inducing effect from illness and a lower compensation ratio from medical insurance.

Keywords

Dynamic Return to Poverty; Return to Poverty Caused by Disease; Medical Insurance; Recursive Bivariate Probit Model

References

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