| This study models the demand for employment-based State Medical Insurance (SMI) in China, using a switching simultaneous equation model developed from economic theories of expected utility, job selection, human capital, and demand for health insurance. Using data from the 1991 China Health and Nutrition Survey (CHNS), the model is estimated with two stage probit method developed by Lee.; The study finds that after controlling for individuals' socioeconomic characteristics, their probabilities of selecting non-SMI jobs increase as the jobs' wage rates increase. When the wage rates increase from 1 to 100 percent, the probabilities increase from 0.65 to 37 percent. This suggests, when selecting jobs, individuals are sensitive to changes in wage rates, whether the changes are the extra benefits or increased wages. Those with lower wages are more sensitive to wage changes. Because of the large variation in wage rates in China, it may be a better policy for the Chinese government to establish a financial risk sharing scheme for all employees, regardless of sector, and require all employers to pay a fixed percentage of their total wages as premiums. Under such a system, all employees could get equal coverage.; The study also finds that, in general, females, those with poor human capital (less education and labor market experience, poor health, or low skill occupations) and those residing in less developed areas (Guizhou province, rural villages) are more likely to hold non-SMI jobs.; After adjusting for selectivity bias, SMI jobs pay an average of fifteen percent more than non-SMI jobs, in addition to the SMI benefits. This might be caused by (1) entry barriers to SMI jobs indicating that China's labor market was not yet well developed by 1991, (2) unmeasured benefits of non-SMI jobs, or (3) unmeasured expected disutility from SMI jobs. |
