Social learning and health insurance enrollment: Evidence from China's New Cooperative Medical Scheme

• We find significant endogenous peer effects in health insurance take-up decision.
• The main mechanism for the peer effects is social learning.
• The peer effects decrease with households’ familiarity with the insurance program.
• The peer effects decrease with the development of alternative information channels.
• There are opinion leaders of insurance take-up decisions in rural China.

This paper examines the role of social learning in household enrollment decisions for the New Cooperative Medical Scheme (NCMS) in rural China by estimating a static game with incomplete information. Using a rich dataset from the China Health and Nutrition Survey, we find that a 10-percentage-point increase in the enrollment rate in a village increases one's take-up probability by 5 percentage points. Using multiple model specifications, we show that the estimated social effects are not driven by simultaneity or common unobserved factors but are consistent with the hypothesis of social learning. We also find that the importance of social effects decreases significantly with households’ familiarity with the NCMS as well as with the development of alternative information channels, which further ascertains that the primary mechanism for the social effects is social learning. The evidence suggests that healthier, wealthier, relatively well-educated, older Han male household heads tend to be opinion leaders.