Health Shocks, Village Elections, and Long-Term Income: Evidence from Rural China / Li Gan, Lixin Colin Xu, Yang Yao.

Format:

Book

Author/Creator:

Gan, Li.

Contributor:

National Bureau of Economic Research.

Xu, Lixin Colin.

Yao, Yang.

Series:

Working Paper Series (National Bureau of Economic Research) no. w12686.

NBER working paper series no. w12686

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Health Shocks, Village Elections, and Long-Term Income

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2006.

Summary:

Using a sample of households in 48 Chinese villages for the period 1986-2002, this paper studies the dynamic effects of major health shocks on household income and the role played by village elections in mitigating these effects. Our results show that in the first 15 years after a shock, a shock-hit household on average falls short of its normal income trajectory by 11.8% and its recovery would take 19 years. Based on the premise that shock-hit families impose negative externalities on richer families by borrowing from them, our political economy model predicts that the outcome of village elections would differ from that of a standard median voter model in that the elected village leaders tend to adopt pro-poor policies. Our empirical study finds that villages are more likely to establish a healthcare plan after the election is introduced. In addition, village elections reduce the probability of a household to borrow by 16.7% when one of its working adults is seriously sick. As a result, they reduce more than half of the negative effect of a health shock on household income.

Notes:

Print version record

November 2006.