Unequal Benefits: The Effects of Health Insurance Integration on Consumption Inequality in Rural China

Abstract

Releasing the consumption potential of rural residents and narrowing the consumption gap is crucial for expanding domestic demand and enhancing social equity. This study leverages data from the China Family Panel Studies (CFPS) spanning the years 2012 to 2018 to analyze the impact of the rural-urban health insurance integration policy on consumption inequality in rural areas and its underlying mechanisms. Employing a staggered difference-in-differences (DID) approach, the analysis reveals that the policy significantly raises consumption levels among middle and high-income groups while concurrently reducing expenditures for the lowest-income bracket, thereby exacerbating consumption inequality. Heterogeneity analysis indicates that the impact of rural-urban health insurance integration on rural consumption inequality is manifested in both consumption structure and life-cycle effects, with the most significant disparities observed in subsistence and enjoyment consumption, particularly among middle-aged and older age groups. Mechanism analysis identifies increased utilization of medical services, the release of precautionary savings among middle and high-income cohorts, and variations in health insurance funding modalities as key drivers of the widening consumption inequality gap. The study concludes with recommendations to progressively advance the establishment of parity in rural-urban integrated health insurance and to prioritize policy support for vulnerable groups, especially the elderly and impoverished households.