Health insurance and savings over the life cycle—a semiparametric smooth coefficient estimation

Abstract

SUMMARYIndividuals save for future uncertain health care expenses. This is less efficient than pooling health risk through insurance. The provision of comprehensive health insurance may raise welfare by providing the missing market to smooth out consumption through the life cycle. We employ a semiparametric smooth coefficient model to examine the effects of the introduction of the National Health Insurance in Taiwan in 1995 on savings and consumption over the life cycle. The idea is to estimate the coefficients of health insurance which vary with age. Our results suggest that younger households are more sensitive to the risk reductions, and that they demonstrate a greater response in the reduction of their precautionary saving.

The Pension Option in Labor Insurance and Precautionary Savings: Evidence from Taiwan

“…Our results are consistent with the findings in Chou et al (2004) and indicate a clear lifecycle pattern. On the one hand, younger households usually possess less wealth and thus are 27 more prudent due to decreasing absolute prudence; this implies they would be more sensitive to risk reduction associated with the provision of pension benefits.…”

“…This trend variable, Trend, is defined as the difference between the current year and 2006. Using the trend variable can control for time effects other than pre-and post-annuitization (Chou et al 2004, Cohen et al 2008). If δ is statistically significant, there exists a significant relationship between the change in precautionary savings (or consumption) and the provision of the pension option.…”

“…We cannot identify unemployment by premium. 26 Chou et al (2003Chou et al ( , 2004 exclude households with negative savings in their empirical studies. Focusing on the same dataset, Kuan and Chen (2011) find that households with negative savings account for 18.9% of the entire sample.…”

“…It is a common practice to control for permanent income in the saving/consumption functions; see, e.g., Guiso et al (1992), Starr-McCluer (1996), Kazarosian (1997) and Chou et al (2004). Thus, permanent income is included as an independent variable in our models.…”

Gasoline taxes or efficiency standards? A heterogeneous household demand analysis

“…The semiparametric smooth coefficient model is a useful yet flexible specification for studying a general regression relationship with varying coefficients. There is rich empirical literature for using this model to address parameter heterogeneity that cannot be accomplished by parametric models (Chou et al, 2004;Kumbhakar and Sun, 2012;Delgado, 2013;Liu, 2014).…”