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Open Access Publications from the University of California

Three Essays on Applied Microeconomics

  • Author(s): Cao, Yang
  • Advisor(s): Lleras-Muney, Adriana
  • et al.

In these essays, I study the following three topics in Applied Microeconomics using datasets of China: (1) The impact of political movements in the first thirty years of People's Republic of China on the intergenerational and multigenerational transmission of education; (2) The relationship between health insurance and households' consumption; (3) The effect of health insurance on out-of-pocket medical expenditures. The first chapter investigates the effect of family class origin on educational attainment and intra-family educational transmission process by using the newly released China Family Panel Study (CFPS) data. The paper focuses on three typical generations, those that completed their education before the beginning of the Maoist era, during the Land Reform and the Cultural Revolution, and after the end of the Cultural Revolution. Suffering from the class-based violence and discrimination, the members of landlord and rich-peasant families, who completed their education during the political movements, attained significantly lower education than the members of other families did. However, the offspring of landlord and rich peasant families are more likely to have higher educational achievement after the end of the Cultural Revolution. I also find evidence of a direct effect of grandfather's education on grandson's education beyond intervening causal mechanisms through fathers. This multigenerational effect on education is particularly strong within former landlord and rich-peasant families. The second chapter discusses the relationship between medical insurance and consumption. I set up a simple theoretical model to show that medical insurance acts as a buffer against possible health shocks, which makes precautionary saving less necessary and thus stimulates consumption. The China Health and Nutrition Survey is utilized in empirical tests. I find that the coefficient of insurance is significantly positive and that it is robust to alternative specifications. Moreover, I notice that cooperative insurance has the smallest effect among all kinds of insurance, which indicates that it is necessary to allocate more resources to this kind of insurance. I also provide evidence that the effect of insurance is greater for people with low income or who face a greater danger of health shock. The third chapter examines the effect of health insurance on out-of-pocket medical expenditures. In 1998, the Chinese government launched a health insurance reform to expand the health insurance coverage in urban China. The reform aimed at putting all urban employees into a new health insurance scheme, Urban Employee Health Insurance (UEHI). The new scheme was rolled out sequentially across different working units including government, state-owned enterprises, and private enterprises. This paper employs a difference-in-difference strategy to make use of this variation of eligibility across different working units and over time to identify the impact of reform. I find that the reform substantially increased the probability of being covered by health insurance and reduced the out-of-pocket medical expenditures of the employees of private enterprises. Besides, the reform significantly reduced the risk of exposure to catastrophic medical expenditures of the employees of both private enterprises and SOEs.

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