Risk Sharing of Chinese Households: An Empirical Research Based on Partial Insurance Hypothesis
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| Title | Risk Sharing of Chinese Households: An Empirical Research Based on Partial Insurance Hypothesis
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| Author | Wang Wen and Zhang Yunzhi |
| Organization | University of International Business and Economics |
| Email | wangw6966@vip.sina.com；zhangyunzhi1000@126.com |
| Key Words | Households’ Risk Sharing Ability; Partial Insurance Hypothesis; China Health and Nutrition Survey |
| Abstract | The ability of risk sharing indicates the completeness of social security system, the efficiency of financial market, and the degree of economic development. Nowadays, when Chinese households face risk events, the rate of personal payment over total payment is way higher than the standards recommended by international organizations. This phenomenon indicates that households aren’t capable of sharing risks properly. Based on Partial Insurance Hypothesis, this paper empirically tests households’ risk sharing ability by using 1817 sample families filtered from China Health and Nutrition Survey (CHNS) Database (1991 to 2011). Empirical results suggest that 75% permanent income shocks and 52% temporary income shocks are insured. In our research, households have longer time (2 or 3 years) to counter risks compared to other researches. For robustness check, estimated risk sharing of households is significantly weaker when using similar sample (UHS) in which households only have 1 year to counter risks. To improve the ability of risk sharing, government should insist on the promotion of diversified social security system proposed by “Opinions of the State Council on Accelerating the Development of Modern Insurance Industry”, and thus make commercial insurance carry more duties. |
| Serial Number | WP915 |
| Time | 2015-08-18 |
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