TY  - JOUR
AU  - Gan,Li
AU  - Xu,Lixin Colin
AU  - Yao,Yang
TI  - Health Shocks, Village Elections, and Long-Term Income: Evidence from Rural China
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 12686
PY  - 2006
Y2  - November 2006
UR  - http://www.nber.org/papers/w12686
L1  - http://www.nber.org/papers/w12686.pdf
N1  - Author contact info:
Li Gan
Department of Economics
Texas A&M University
College Station, TX 77843-4228
Tel: 979/862-1667
Fax: 979/847-8747
E-Mail: gan@econmail.tamu.edu

Lixin Colin Xu
MC 3-420, World Bank
1818 H Street, N.W.
Washington, DC 20433
E-Mail: lxu1@worldbank.org

Yang Yao
China Center for Economic Research
Peking University
Peking, China
E-Mail: yyao@ccer.pku.edu.cn
AB  - 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.
ER  -