Journal of Economics and Management Volume 17, No. 1 March, 2021

Private Health Insurance Demand in China: Considering the Nonlinear Impact of Income

Guochen Pan

Department of Insurance and Actuarial Science, Economics and Management School, Wuhan University, China

Mengqi Liu

Department of Insurance and Actuarial Science, Economics and Management School, Wuhan University, China

Abstract

Against the background of fast economic growth during the past decades, the demand for private health insurance (PHI) is of particular interest for both private insurance sector and public policy makers in China. According to the previous literature, the nonlinear relationship between income and PHI demand might exist. The threshold effect of disposable income on PHI demand is tested with data from 30 provinces in China employing Panel Smooth Transition Regression (PSTR) model. Empirical results show that the sample data is found to scatter within two distinctive demand regimes with smooth switching process. The significant determinants for PHI demand change accordingly in different regime. Our research results imply that, when trying to promote the PHI in various regions, the governments and the insurance firms should take different strategies and policies.

Keywords：Threshold Effect; Disposable Income; Private Health Insurance Demand; Panel Smooth Transition Regression.

JEL Classifications：G15, I11, C23.

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