Effects of health insurance on labour supply: evidence from the health care fund for the poor in Vietnam

Abstract

The expansion of health insurance in emerging countries raises concerns about the unintended negative effects of health insurance on labour supply. This article examines the labour supply effects of the Health Care Fund for the Poor (HCFP) in Vietnam in terms of the number of work hours per month and labour force participation (the probability of employment). Employing various matching methods combined with a Difference-inDifferences approach on the Vietnam Household Living Standard Surveys 2002-2006, we show that the HCFP, which aims to provide poor people and disadvantaged minority groups with free health insurance, has a negative effect on labour supply. This is manifested in both the average number of hours worked per month and the probability of employment, suggesting the income effect of the HCFP. Interestingly, the effects are mainly driven by the non-poor recipients living in rural areas, raising the question of the targeting strategy of the programme.

The Impacts Of A Free Health Insurance Policy In Vietnam

“…First, my estimates show that households of young children have higher wages than the control group by 9.8 percent. This is somewhat inconsistent with recent evidence that shows health insurance for the poor in Vietnam decreased the number of working hours as well as the probability of employment (N. Le et al, 2019). Though I find no significant effects of the policy on household income per capita, the results indicate that households with young children have lower expenditure per capita and adult equivalents than the control group by 3.8 and 2.4 percent, respectively.…”

“…SHI might also impact the health outcomes of other untargeted members in households. In other words, the health benefits of SHI can spill over to those who happen to live in the same family as the beneficiary (Duflo, 2003;Fitzsimons, Malde, Mesnard, & Vera-Hernández, 2016;Kazianga, de Walque, & Alderman, 2014;N. Le, Groot, Tomini, & Tomini, 2019;Monheit & Vistnes, 2015;Robinson, 2013;Ver Ploeg, 2009).…”

“…At the household level, SHI can have spill over effects on various outcomes such as living standard, assets, employment, expenditure on healthcare and education, housing conditions and nutritional status (Adams et al, 2018;Fitzsimons et al, 2016;Le et al, 2019;Leininger, Levy, & Schanzenbach, 2010;Wagstaff & Pradhan, 2005). Not only can SHI benefit the targeted households via budget constraints, but it might also relieve stress related to illness and its financial burden or even boost the confidence of the decision-makers of families.…”

“…Recent studies provide mixed evidence on the impact of health policy on household labour supply. While Beuermann and Garzon (2016) show that intervention in Africa can increase parental household supply, N. Le et al (2019) suggests that the free health insurance policy for the poor in Vietnam might reduce household working hours. This study complements these papers by examining whether the FHI policy for young children has any impact on household wages and income per capita.…”