Health Insurance and Precautionary Saving

Abstract

Recent studies stress precautionary motives for saving: with uncertain income and health, households may accumulate wealth to guard against lower consumption in the future. This paper examines the relationship between health insurance and savings, using high-quality data on household finances. The precautionary view predicts higher savings among households without insurance, ceteris paribus. I find that insurance does reduce saving, once the endogeneity of coverage is taken into account.