Perceived need and actual demand for health insurance among rural Chinese residents

One would expect that an individual perceives a need for health insurance before making a purchase. However, simply perceiving a need for insurance is not sufficient for making a purchase. When insurance is “lumpy” individuals perceiving a need may not make a purchase if financial resources are lacking. In this paper we develop a theoretical model which differentiates need from demand for health insurance. We then empirically investigate rural health insurance demand in China. We find that factors like children, education and wealth affect perceived need differently from the way they affect demand.