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Working paper 730

Chaoran Chen, Zhigang Feng, Jiaying Gu, "Health, Health Insurance, and Inequality", 2022-08-26
Main Text (application/pdf) (795,237 bytes)

Abstract: This paper identifies a ''health premium" of insurance coverage that the insured is
more likely to stay healthy or recover from unhealthy status. We introduce this feature
into the prototypical macro-health model and estimate the baseline economy by
matching the observed joint distribution of health insurance purchase, health status
and income over the life cycle. Quantitative analysis reveals that an individual's insurance
status has significant and persistent impact on health, which will be reinforced by
and subsequently amplify the feedback effect of health on labor earnings and income
inequality. Providing ''Universal Health Coverage" would narrow health and life expectancy
gaps, with a mixed effect on income distribution in absence of any additional
redistribution of income or wealth.

Keywords: Health Insurance, Health Disparity, Income Distribution

JEL Classification: E21, E60, I14, O15