Household debt and universal health coverage in Thailand : empirical evidence on the household savings

Abstract

Many studies have found that social security system such as pension system depresses household savings. The Universal Health Coverage (UHC) scheme is a type of social security system in Thailand, but it is questionable whether or not it is contributes to household debt. The two purposes of this paper are to theoretically analyze the pros and cons of implementing the UHC or Co-Payment Scheme (CPS) in a small open economy with the focus on Thailand by using a two-period Overlapping Generations Model (OLG), and to analyze the causal relationship between healthcare subsidy and household savings according to empirical evidence from Thailand. The theoretical results reveal that as long as the public debt level remains manageable, the UHC is recommended over the CPS for countries like Thailand, where people have a low Intertemporal Elasticity of Substitution (IES) since it promotes good health, GDP, consumption, savings, and even economic stability. The empirical evidence supports the theory that the income effect is more robust than the substitution effect in Thailand, and the healthcare subsidy unidirectionally Granger causes household savings to fluctuate in both the long and the short run.