Supplementary Health Insurance and Income: Evidence from Critical Illness Insurance in China

Abstract This paper investigates how the implementation of public supplementary health insurance affects economic well-being in China. By combining manually collected policy data and nationally representative household survey data, exploiting the county-by-county roll-out of China's major public supplementary health insurance (Critical Illness Insurance), and utilizing the staggered difference-in-differences method, we provide evidence for the pivotal role of public supplementary health insurance in improving population income. The vulnerable groups (those who are older, with rural hukou, and with chronic illnesses) benefit more from the insurance implementation. Further analyses reveal that improved health, subjective well-being, and work performance are important pathways. Our research provides new insights into the full benefits of the implementation of public supplementary health insurance, and our findings have direct relevance to health and income policies.