The Effect of Health Shock and Basic Medical Insurance on Family Educational Investment for Children in China

Abstract

This paper explores the role of basic medical insurance in protecting family investment in child education. First, this paper establishes a two-phase overlapping generation model to theoretically analyse the impact of basic medical insurance on investment in child education under the influence of the impact of parental health. The results show that health shock reduces parental investment in child education, and medical insurance significantly alleviates the negative impact of parental health shock on investment in child education. Furthermore, this paper establishes a two-way fixed effect regression model based on the data of China Family Panel Studies (CFPS) in 2014 and 2016 to empirically test the above results. The results showed that parental health shocks negatively affect investment in child education, and paternal health shock has a more significant impact than maternal health shock. However, medical insurance significantly reduces this negative impact, provides security in investment in child education, and promotes the improvement of human capital.