FOREIGN TRADE UNIVERSITY

FACULTY OF INTERNATIONAL ECONOMICS

______o0o______

ECONOMETRICS 1 | REPORT

FACTORS AFFECTING THE SOCIAL INSURANCE

PURCHASE RATE OF CITIZENS IN VIETNAM

Instructor Dr. Đinh Thị Thanh Bình

Group 04
Class KTEE218(HK1-2324)1.1
Members Nguyễn Trần Quỳnh Anh - 2212450013
Phí Lâm Nhi - 2212450062
Trần Ngọc Minh - 2212450058
Phạm Mai Linh - 2213450051

Hanoi, September 2023

 TABLE OF CONTENTS

TABLE OF CONTENTS ............................................................................................................. 2

TABLE OF FIGURES .................................................................................................................. 4

INDIVIDUAL ASSESSMENT .................................................................................................... 5

ABSTRACT ................................................................................................................................... 6

INTRODUCTION......................................................................................................................... 7

SECTION I: OVERVIEW OF THE TOPIC ............................................................................. 9

1. Literature review ..................................................................................................... 9

1.1. Definition and the growth of insurance .............................................................. 9

1.2. Determinants of Demand on Purchasing Insurance Policy ............................. 10

2. Theoretical framework ......................................................................................... 11

3. Research Hypothesis ............................................................................................. 13

SECTION II: METHODOLOGY AND MODEL SPECIFICATION .................................. 14

1. Methodology........................................................................................................... 14

1.1. Method used to collect data .............................................................................. 14

1.2. Method used to analyse data ............................................................................ 14

2. Empirical Model .................................................................................................... 14

2.1. Model Specification .......................................................................................... 14

2.2. Variables Description ....................................................................................... 16

3. Data ......................................................................................................................... 18

3.1. Source of data ................................................................................................... 18

3.2. Statistical description of variables ................................................................... 18

3.3. Correlations between variables ........................................................................ 20

2
SECTION III: ESTIMATED MODEL AND STATISTICAL REFERENCES ................... 22

1. Estimated model .................................................................................................... 22

1.1. Estimation result ............................................................................................... 22

1.2. Sample regression model .................................................................................. 22

2. Hypothesis testing .................................................................................................. 23

2.1. Comparison of estimation results with expectations ........................................ 23

2.2. Testing significance of an individual regression coefficient ............................ 24

2.3. Testing overall significance of the model ......................................................... 26

3. Policy implications ................................................................................................. 27

CONCLUSION ........................................................................................................................... 29

REFERENCES ............................................................................................................................ 30

APPENDIX: DATASET............................................................................................................. 32

3
 TABLE OF FIGURES

Table 1: Description of variables used in the model .................................................................. 16

Table 2: Statistical description .................................................................................................... 19
Table 3: Classification of correlation .......................................................................................... 20
Table 4: Correlation matrix between variables ........................................................................... 20
Table 5: OLS regression result .................................................................................................... 22
Table 6: Testing significance of an individual regression coefficient ......................................... 25
Table 7: Social insurance purchase rate in Vietnam, 2016 - 2021 .............................................. 27

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 INDIVIDUAL ASSESSMENT

No. Full name Student ID Contribution level

1 Nguyễn Trần Quỳnh Anh 2212450013 25%

2 Phí Lâm Nhi 2212450062 25%

3 Trần Ngọc Minh 2212450058 25%

4 Phạm Mai Linh 2213450051 25%

5
 ABSTRACT
This study delves into the multifaceted determinants influencing citizens' decisions to
engage with social insurance programs in Vietnam. Through a comprehensive analysis,
encompassing economic, demographic, and policy-related dimensions, the research aims
to provide a nuanced understanding of the factors shaping social insurance enrollment. The
primary objectives include gaining insights into motivations and barriers, informing
evidence-based policy recommendations, and contributing to the enhancement of social
protection mechanisms. Anticipated outcomes involve refined policy strategies, improved
accessibility, and strengthened financial resilience among citizens. This research holds
substantial significance in social policy and welfare economics, offering insights crucial to
the socio-economic development of Vietnam.

6
 INTRODUCTION

The report aims to conduct a comprehensive analysis of the multifaceted determinants

influencing the rate of social insurance enrollment among citizens in Vietnam. This in-
depth study will delve into a range of factors, including but not limited to socio-economic
status, employment conditions, accessibility to insurance programs, awareness and
understanding of social insurance benefits, demographic characteristics, cultural and
societal perspectives, as well as governmental policies and regulatory frameworks. By
examining these interrelated elements, the report seeks to provide a nuanced understanding
of the dynamics shaping citizens' decisions to participate in social insurance schemes. The
insights garnered from this analysis will not only facilitate an enriched comprehension of
social insurance behaviour but will also serve as a foundation for informed policy
recommendations aimed at bolstering social insurance coverage and effectiveness.

The primary goal of this study is to gain a thorough understanding of the complex
motivations and barriers that citizens encounter when contemplating participation in social
insurance schemes. This insight will contribute to a comprehensive grasp of the social
insurance landscape in Vietnam. Additionally, the research seeks to provide evidence-
based insights for policymakers and stakeholders. These insights will guide the
development of targeted policies and interventions to improve accessibility and enrollment
in social insurance programs.

Moreover, this research endeavours to enhance social protection mechanisms in Vietnam

by identifying areas for improvement. It aims to contribute to the development of more
effective and inclusive social insurance programs. Furthermore, the study aims to offer
empirical evidence regarding the determinants of social insurance enrollment, providing a
robust foundation for further academic inquiry and policy discourse in the field of social
welfare and insurance systems.

This research anticipates providing nuanced insights into the diverse range of factors
influencing citizens' decisions regarding social insurance participation. These insights are
essential for formulating policies that align with the needs and preferences of the
population.

7
This research holds substantial significance in the realm of social policy and welfare
economics. By addressing a critical aspect of citizens' economic security and well-being,
it sheds light on the complexities surrounding social insurance participation. Through its
findings, this study endeavours to foster a more inclusive and effective social protection
system, ultimately contributing to the broader socio-economic development of Vietnam.

8
 SECTION I: OVERVIEW OF THE TOPIC

1. Literature review

1.1. Definition and the growth of insurance

Insurance is an arrangement or contract in which one party agrees to indemnify another

against a predefined category of risks in exchange for a premium. In other words, insurance
is the pooling of fortuitous losses by the transfer of such risks to insurers, who agree to
compensate the insured party for such losses, to provide other pecuniary benefits on their
occurrence, or to render services connected with the risk.

According to the US Department of Labor Handbook (2008), insurance is considered a

means of protection from financial loss. The company which provides insurance is known
as an insurer, whereas a person or an institution that buys insurance is known as an insured
or policyholder. The policyholder receives a contract, called the insurance policy, which
details the conditions and circumstances under which the policyholder will be financially
compensated for any possible loss. The amount charged by the insurer to the policyholder
for the coverage outlined in the insurance policy is called the premium.

As for the rapid technological advancements and the move towards globalisation, the
insurance industry plays a significant role in modern economies. The insurance business
started a long time ago, approximately in 1840. The industrial revolution and the first auto
insurance arose in 1898. The insurance industry has developed into one of the most
important drivers of economic growth. The increase of uncertainty and complexity in
business environments was a cause for insurance to become a key component since it has
the ability to cover such risks related to business, social groups and individuals. The
insurance sector helps societies and economic growth in many ways such as managing risk,
encouraging loss mitigation, reducing worry, promoting financial stability, providing all
services of social protection, and providing safety and security.

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1.2. Determinants of Demand on Purchasing Insurance Policy

A large part of the literature has studied the determinants of insurance development. Using
different methodologies, many researchers have proved that the demand for insurance is
affected by a wide range of economic, demographic, socio-cultural and institutional
determinants.

To begin with, education is a demographic determinant that is expected to have a positive

impact on insurance demand. In most academic literature, the level of education in a
country is used as a proxy for risk aversion. Concerning life insurance demand, Truett and
Truett (1990) showed that a higher level of education represents a stronger desire to protect
dependents, which means that education has a significant positive influence on the demand
for insurance. According to Outreville (1996), it is also emphasised that individuals with
higher levels of education are more aware of the risk and importance of risk management,
which may encourage them to purchase insurance policies.

Among all the factors of influence, income is essential in all the models of insurance
demand. Income refers to the money that a person or entity receives in exchange for their
labour or products. For most people, income means their total earnings in the form of wages
and salaries, the return on their investments, pension distributions, and other receipts. For
businesses, income means the revenues from selling services, products, and any interest
and dividends received with respect to their cash accounts and reserves related to the
business. Therefore higher income is expected to increase the demand for insurance,
generating a greater affordability of insurance products. This demand derives from the need
to safeguard the potential income of children against the premature death of the employed
parent (Feyen, Lester and Rocha 2011). Besides, in a study of 68 countries, Beck and Webb
(2003) also explained that for higher incomes, the insurance demand rises because the
human capital of an individual increases along with income.

Another determinant expected to have an impact on insurance demand is life expectancy

which is the average age that a person expected to live. According to Beenstock, Dickinson
and Khajuria (1986), using a set of 10 developed countries, they have shown that
dependency ratio, life expectancy, and disposable income have a positive influence on
insurance demand. However, Browne and Kim (1993) and Outreville (1996) indicated that
life expectancy is not always significant although it displays the postulated negative

10
influence in some models. This phenomenon may be explained by the difficulty in
separating the positive wealth effect associated with a higher life expectancy from the
negative effect associated with the lower probability of the income earner’s premature
death. However, we still expect to find a positive impact of life expectancy on the insurance
demand. This is because along with the higher life expectancy, an increasing number of
elderly will put much pressure on young people to look after and provide them with
economic support. As a result, many families may no longer be able to rely on the mutual
support of their families and now need to seek an extended source of financial
independence which is insurance.

The development in the medical aspect also has an impact on the purchasing desire of
customers for insurance policies. Medicine continues to develop at a rapid pace, and many
of these developments, whether they improve the diagnosis or treatment of disease, will
have an impact on life insurance. As for measuring the development level of the medical
aspect, some studies choose to investigate the expansion itself, including the hospital
density and the total number of doctors. According to a study in Germany (Jürges, 2007),
they find no evidence that physician density is endogenous. However, physician density
has a significant positive effect on the decision to contact a physician and on the frequency
of doctor visits of patients insured in the statutory healthcare system. This has given
indirect evidence for the hypothesis that physicians induce demand among privately
insured patients but not among statutorily insured.

Furthermore, throughout many prior studies, researchers have also proved that
unemployment rate has a negative impact on the demand for insurance. This can be
explained by the lack of income to afford the necessities and insurance premium.
Unemployment may lead to higher payments from state and federal governments for
unemployment benefits, food assistance, and Medicaid. With higher unemployment rate,
they will put a heavier burden on the society and the government, resulting in a higher
insurance premium and lower demand on insurance policies.

2. Theoretical framework

Most previous research studying determinants of insurance demand is often based on

numerous variables, spreading across many aspects, such as economic, demographic,
socio-cultural or institutional domains. They also use many different methodologies to

11
discover the influence of each determinant. However, in this study, the authors decided to
use the linear regression model to prove our hypothesis about the impact of each
determinant on insurance demand.

In statistics, linear regression is a linear approach for modelling the relationship between a
scalar response and one or more explanatory variables (also known as dependent and
independent variables). The case of one explanatory variable is called simple linear
regression; for more than one, the process is called multiple linear regression. This term is
distinct from multivariate linear regression, where multiple correlated dependent variables
are predicted, rather than a single scalar variable. Linear regression models require that the
response variable be continuous (and normally distributed), and the variation of the
response observations around the regression line must be approximately constant.

Linear regression was the first type of regression analysis to be studied rigorously, and to
be used extensively in practical applications. This is because models which depend linearly
on their unknown parameters are easier to fit than models which are non-linearly related to
their parameters and because the statistical properties of the resulting estimators are easier
to determine. Linear regression has many practical uses. Most applications fall into the
error reduction goal in forecasting or the explain variation in the response variable. Linear
regression can be used to fit a predictive model to an observed data set of values of the
response and explanatory variables. Its analysis can also be applied to quantify the strength
of the relationship between the response and the explanatory variables, and in particular to
determine whether some explanatory variables may have no linear relationship with the
response at all, or to identify which subsets of explanatory variables may contain redundant
information about the response.

Given a data set {𝑦𝑖, 𝑥𝑖1, . . . . . , 𝑥𝑖𝑝 }𝑛𝑖=1 of n statistical units, a linear regression model
assumes that the relationship between the dependent variable y and the vector of regressors
x is linear. This relationship is modelled through a disturbance term or error variable ε —
an unobserved random variable that adds "noise" to the linear relationship between the
dependent variable and regressors. Thus the model takes the form:
𝑦𝑖 = 𝛽0 + 𝛽0 𝑥𝑖1 + 𝛽0 𝑥𝑖2 + . . . . +𝛽0 𝑥𝑖𝑝 + 𝜀𝑖

12
Whereas:
- 𝑦 is a vector of observed values 𝑦𝑖 (𝑖 = 1, . . . , 𝑛) of the variable called the dependent
variable. The decision as to which variable in a data set is modelled as the dependent
variable and which are modelled as the independent variables may be based on a
presumption that the value of one of the variables is caused by, or directly influenced
by the other variables.
- 𝑥 is known as independent variables
- 𝛽 is a (p+1)-dimensional parameter vector, where 𝛽0 is the intercept term. It is also
known as effects or regression coefficients (although the latter term is sometimes
reserved for the estimated effects).
- 𝜀 is a vector of values 𝜀𝑖 This part of the model is called the error term, disturbance
term, or sometimes noise. This variable captures all other factors which influence
the dependent variable y other than the regressors x. The relationship between the
error term and the regressors, for example, their correlation, is a crucial
consideration in formulating a linear regression model, as it will determine the
appropriate estimation method.

Fitting a linear model to a given data set usually requires estimating the regression
coefficients 𝛽 such that the error term 𝜀 = 𝑦 − 𝑥𝛽 is minimised.

3. Research Hypothesis

According to prior proven studies, all the variables such as degree of education, income
levels, life expectancy, number of doctors and the unemployment rate are believed to
influence the demand for purchasing insurance. In particular, by using the linear regression
model, we expect that every variable in this model, except the unemployment rate, would
have a positive impact on insurance demand, which is the model's dependent variable.

H1: The Level of Education has a positive effect on the demand for insurance
H2: The Average Income level per Employee has a positive effect on the demand for
insurance
H3: Life expectancy has a positive effect on the demand for insurance
H4: The Number of Doctors have a positive effect on the demand for insurance
H5: The Unemployment rate have a negative effect on the demand for insurance

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SECTION II: METHODOLOGY AND MODEL SPECIFICATION
1. Methodology

1.1. Method used to collect data

The data collection method involved leveraging the advanced features of Excel and Stata
software. Excel was adeptly utilised for initial data processing, providing a user-friendly
interface for tasks such as data cleaning and organisation. Stata, on the other hand, proved
invaluable for its powerful analytical capabilities, allowing for a rigorous comparison of
matrix matches between variables. This combination of software not only expedited the
data processing phase but also enabled a comprehensive assessment of correlations and
relationships within the dataset, affirming the robustness of our analytical approach.

1.2. Method used to analyse data

Running Stata software to model regression using the Ordinary Least Squares (OLS)
method to estimate the parameters of multivariable regression models. Using the Stata
software, this report would:
- Use the Correlation matrix in Stata software to figure out the correlation matrix
among variables.
- Use the F-test to test the overall significance of variables in the model.
- Use the P-value method to test the significance of an individual regression
coefficient

2. Empirical Model

2.1. Model Specification

Drawing upon established economic growth theories, particularly those related to the
impact of social insurance participation on overall economic development, and
incorporating methodologies for evaluating social insurance enrollment rates, this study
builds upon prior research endeavours. Integrating insights from prior studies and
leveraging the capacity to gather pertinent research data, this report employs a linear
regression model to estimate the factors influencing the purchase rate of social insurance
and its subsequent effects on economic growth in Vietnam.

14
The model takes into account a comprehensive set of independent variables, including
socio-economic indicators, employment dynamics, accessibility to social insurance
programs, awareness of benefits, demographic profiles, cultural and societal perspectives,
and policy-related factors. By employing econometric techniques, this analysis seeks to
discern the nuanced relationships between these variables and the overall economic growth
trajectory.

Furthermore, the model incorporates temporal dimensions to capture potential shifts in the
relationship between social insurance participation and economic growth over time.
Through this comprehensive approach, the study aims to provide a robust framework for
understanding the complex interplay between social insurance enrollment rates and the
broader economic landscape in Vietnam.

Population Regression Model

𝑖𝑛𝑠𝑢𝑟𝑒𝑑 = 𝛽0 + 𝛽1 . 𝒍𝒊𝒇𝒆𝒆𝒙𝒑 + 𝜷2 . 𝒅𝒐𝒄 + 𝜷3 . 𝒂𝒗𝒓𝒊𝒏𝒄𝒐𝒎𝒆 + 𝜷4 . 𝒆𝒅𝒖𝒄
+ 𝜷5 . 𝒖𝒏𝒆𝒎𝒑𝒍𝒐𝒚 + 𝒖𝒊
In which:
- insured: social insurance purchase rate (%)
- lifeexp: life expectancy (years)
- doc: number of doctors in the region (people)
- avrincome: monthly average income per employee (thousand VND)
- educ: percentage of trained workers over 15 (%)
- unemploy: unemployment rate (%)

Sample Regression Model

𝑖𝑛𝑠𝑢𝑟𝑒𝑑 = 𝛽̂ + 𝛽̂ . 𝒍𝒊𝒇𝒆𝒆𝒙𝒑 + 𝜷̂ . 𝒅𝒐𝒄 + 𝜷̂ . 𝒂𝒗𝒓𝒊𝒏𝒄𝒐𝒎𝒆 + 𝜷̂ . 𝒆𝒅𝒖𝒄
0 1 2 3 4

+ 𝜷̂5 . 𝒖𝒏𝒆𝒎𝒑𝒍𝒐𝒚 + 𝑢̂𝑖

In which:
- 𝛽̂ : the estimator of intercept of the model
0
- 𝛽̂𝑗 : the estimator of coefficient g with 𝑗 = (1,2,3,4)
- 𝑢̂𝑖 : the residuals - estimator of disturbance 𝒖𝒊

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2.2. Variables Description

In examining the Factors Affecting the Social Insurance Purchase Rate of Citizens in
Vietnam, this study identifies and assesses several key variables. These variables
collectively serve as crucial components in comprehending the complex dynamics that
shape citizens' decisions to participate in social insurance programs within the Vietnamese
context. In our model, the five indicators will be the independent factors of the regression
model.

Table 1: Description of variables used in the model

Expected
Variable Name Meaning Unit
sign

Dependent variable

Social The purchase rate of social

Percentage
insured insurance insurance in Vietnam by
(%)
purchase rate Province

Independent variable

Average life expectancy

lifeexp Life expectancy calculated from birth by Years (+)
locality by Province

Number of
Number of doctors
doc doctors in the People (+)
by Province
region

Monthly
Average income per working Thousands
avrincome average income (+)
worker by Province VND
per employee

Trained Probability of trained workers Percentage

educ (+)
workers over 15 aged over 15 by Province (%)

Unemployment Average unemployment rate Percentage

unemploy (-)
rate by Province (%)

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● Social insurance purchase rate is referred to as a dependent variable (insured): This
variable measures the percentage of eligible citizens in Vietnam who actively
participate in social insurance programs. It quantifies the level of uptake or adoption
of various social insurance schemes, providing valuable insights into the
effectiveness and inclusivity of these programs.

● Life Expectancy (years): Life expectancy represents the average number of years a
person is expected to live, based on current mortality rates. In the context of this
study, it serves as an important demographic indicator, reflecting the overall health
and well-being of the population. It can influence social insurance participation
rates, as individuals with longer life expectancies may have different considerations
for enrolling in insurance programs.

● Number of Doctors in the Region (people): This variable denotes the total count of
medical doctors within a specific geographical region in Vietnam. It reflects the
availability of healthcare resources, which can impact citizens' decisions to
participate in social insurance programs. Regions with higher numbers of doctors
may indicate better access to healthcare services, potentially influencing insurance
enrollment.

● Monthly Average Income per Employee (thousand VND): This variable measures
the average monthly income earned by an employee in Vietnam, expressed in
thousands of Vietnamese Dong (VND). It serves as a crucial economic indicator,
influencing individuals' financial capacity to participate in social insurance
programs. Higher income levels may lead to greater willingness and ability to
contribute to insurance schemes.

● Trained Workers Over 15 (%): This variable represents the percentage of

individuals over the age of 15 who have received formal training or education in a
specific skill or profession. It reflects the level of human capital and skills
development within the population. Higher percentages of trained workers may
correlate with increased awareness and understanding of the benefits associated
with social insurance, potentially influencing participation rates.

● Unemployment Rate (%): The Unemployment Rate is a crucial economic metric

that quantifies the percentage of individuals within a specific region or country's
labor force who are actively seeking employment but are currently without a job.

17
 This indicator provides essential insights into the state of the labor market, offering
a snapshot of job availability and workforce participation. A higher unemployment
rate suggests potential challenges in finding employment, while a lower rate
indicates a healthier job market. Policymakers, economists, and analysts closely
monitor this metric to assess the economic well-being and stability of a population.

These variables collectively form a comprehensive set of indicators to assess the

multifaceted factors influencing the social insurance purchase rate among citizens in
Vietnam. They encompass demographic, economic, and healthcare-related dimensions,
providing a holistic framework for understanding the dynamics at play.

3. Data

3.1. Source of data

To investigate the topic, data from 63 cities and provinces in Vietnam was collected and
published on the website of the General Statistics Office of Vietnam in 2020. Currently,
the General Statistics Office is an agency under the Ministry of Planning and Investment
that performs the function of advising and assisting the Minister of Planning and
Investment in state management of statistics; organising statistical activities and providing
socio-economic statistical information to domestic and international agencies,
organisations and individuals according to the provisions of law. The statistical information
published and provided by the General Statistics Office is an official, legal source of
information, trusted and used by all levels, sectors, organisations and individuals
domestically and internationally. The data of all five variables in the model, which are
Social Insurance Purchase Rate (insured), Life expectancy (lifexp), Number of Doctors in
the Region (doc), Monthly Average Income per Employee (avrincome), and Trained
Workers Over 15 (educ).

3.2. Statistical description of variables

In this model, five independent variables, lifeexp, doc, avrincome, educ, unemploy, are
used to explain the variation of social insurance purchase rate in each city or province.

The data set used was collected by the General Statistics Office of Vietnam in 2020, with
a total of 63 observations.

18
Run the command: sum insured lifeexp doc avrincome educ unemploy. The results are
obtained as follows:

Table 2: Statistical description

Variables Obs Mean Std. Dev. Min Max

insured 63 23.30317 12.52776 9.5 63.7

lifeexp 63 73.27794 2.335692 66.69 76.47

doc 63 365.2356 376.885 1.124 982

avrincome 63 4785.987 1323.11 2166.4 8486.3

educ 63 20.94603 7.723261 10.27 48.5

unemploy 63 2.374127 1.396249 0.42 9.41

Source: STATA

- insured: The average social insurance purchase rate is 22.30317%. The lowest
value is 9.5% while the highest value is 63.7%. The significant difference between
a high of 63.7% and a low of 9.5% demonstrates a diverse distribution of different
levels in the data sample.
- lifeexp: The average life expectancy in Vietnam is 73.27794, with a relatively low
standard deviation of 2.335692. The life expectancy value ranges from 66.69 to
76.47.
- doc: The average number of doctors in each region is 365.236. The lowest value is
1124, while the highest value is 982. The standard deviation is 376.885, which is
high.
- avrincome: The values vary from 2166.4 to 8486.3, with an average value of
4785.987.
- unemploy: The average unemployment rate in Vietnam in 2020 is 2.374127%. The
highest value is 9.41%, while the lowest value is 0.42%.

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3.3. Correlations between variables

According to Evans JD. (1996), the absolute value of correlation between variables can be
classified as follows:

Table 3: Classification of correlation

Absolute value of correlation Classification

< 0.20 Very weak

0.20 - 0.39 Weak

0.40 - 0.59 Moderate

0.60 - 0.79 Strong

0.80 and above Very strong

Run the command: corr insured lifeexp doc avrincome educ unemploy. The table below
illustrates the correlation, which is the degree of linear association between independent
variables and dependent variables.

Table 4: Correlation matrix between variables

insured lifeexp doc avrincome educ unemploy
insured 1.0000
lifeexp 0.4651 1.0000
doc -0.3179 -0.2601 1.0000
avrincome 0.8082 0.7247 -0.4110 1.0000
educ 0.6631 0.2624 -0.1651 0.5074 1.0000
unemploy 0.2471 0.4049 -0.1515 0.4549 0.3847 1.0000
Source: STATA

According to the results, all the independent variables have correlations with the dependent
variable. Thus, all the independent variables should be included in the model. The majority
of independent variables have a positive correlation, representing positive relationships,
except for variable doc which has a negative correlation with independent variable
insured.

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 - r(insured, lifeexp) = 0.4651. This means that life expectancy has a statistically
significant effect on the social insurance purchase rate, and the effect is moderate
̂ > 0). Given the sample collected, if life expectancy
and positive (since 𝛽𝒍𝒊𝒇𝒆𝒆𝒙𝒑
increases by 1 year, the social insurance purchase rate will increase by 0.4651%,
holding other factors fixed, as expected.
- r(insured, doc) = -0.3179. This means that the number of doctors in the area has a
statistically significant effect on the social insurance purchase rate, and the effect is
weak and negative (since 𝛽̂ < 0). Given the sample collected, if the number of
𝒅𝒐𝒄
doctors increases by 1, the social insurance purchase rate will decrease by 0.3179%,
holding other factors fixed, contrary to expectation.
- r(insured, avrincome) = 0.8082. This means that monthly average income per
employee has a statistically significant effect on the social insurance purchase rate,
and the effect is very strong and positive (since 𝛽 ̂𝒂𝒗𝒓𝒊𝒏𝒄𝒐𝒎𝒆 > 0). Given the sample
collected, if the monthly average income per employee increases by 1 thousand
VND, the social insurance purchase rate will increase by 0.8082%, holding other
factors fixed, as expected.
- r(insured, educ) = 0.6631. This means that the percentage of trained labour force at
15 years of age and above has a statistically significant effect on the social insurance
purchase rate, and the effect is strong and positive (since 𝛽̂ > 0). If the
𝒆𝒅𝒖𝒄
percentage of trained labour force at 15 years of age and above increases by 1, the
social insurance purchase rate will increase by 0.6631%, holding other factors fixed,
as expected.
- r(insured, unemploy) = 0.2471. This means that the unemployment rate has a
statistically significant effect on the social insurance purchase rate, and the effect is
weak and positive (since 𝛽 ̂ > 0). If the unemployment rate increases by 1,
𝒖𝒏𝒆𝒎𝒑𝒍𝒐𝒚
the social insurance purchase rate will increase by 0.2471%, holding other factors
fixed, as expected.

Therefore, among studied independent variables, the variable avrincome has the strongest
correlation with the dependent variable insured, which indicates that monthly average
income per employee has the most significant effect on social insurance purchase rate. On
the contrary, the variable unemploy has the weakest correlation with the dependent
variable insured, which indicates that the unemployment rate has the weakest effect on the
social insurance purchase rate.

21
 SECTION III: ESTIMATED MODEL AND
STATISTICAL REFERENCES
1. Estimated model

1.1. Estimation result

Run the command: reg insured lifeexp doc averincome educ unemploy

Table 5: OLS regression result

Number of obs = 63
Source SS df MS
F(5, 57) = 42.26
Model 7663.24099 5 1532.6482 Prob > F = 0.0000
R-squared = 0.7875
Residual 2067.33837 57 36.2690943
Adj R-squared = 0.7689
Total 9730.57937 62 156.944828 Root MSE = 6.0224

insured Coef. Std. Err. t P>|t| [95% Conf. Interval]

lifeexp -0.7565321 0.4905804 -1.54 0.129 -1.738902 0.2258381

doc 0.0004472 0.0022357 0.20 0.842 -0.0040296 0.0049241

avrincome 0.0078294 0.0010179 7.69 0.000 0.00057912 0.0098677

educ 0.5894901 0.1201407 4.91 0.000 0.3489125 0.8300678

unemploy -1.881602 0.6366407 -2.96 0.005 -3.156453 -0.6067515

_cons 32.22498 33.16683 0.97 0.335 -34.19045 98.64041

The results are obtained from STATA as follows:

● Number of observations: 63
● Total sum of squared (TSS): 9730.57937
● Explained sum of squared (ESS): 7663.24099
● Residual sum of squared (RSS): 2067.33837

1.2. Sample regression model

Based on the results from STATA, the sample regression model can be presented as
follows:

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 insured = 32.22498 - 0.7565321*lifeexp + 0.0004472*doc + 0.0078294*avrincome +
0.5894901*educ - 1.881602*unemploy + 𝒖 ̂𝒊

In which:
- insured: social insurance purchase rate (%)
- lifeexp: life expectancy (years)
- doc: number of doctors in the region (people)
- avrincome: monthly average income per employee (thousand VND)
- educ: percentage of trained workers over 15 (%)
unemploy: unemployment rate (%)

2. Hypothesis testing

2.1. Comparison of estimation results with expectations

 𝛽̂𝟎 = 32.22498: When the value of all independent variables in the model equals 0,
the average value of the expected social insurance purchase rate of a city or province
in Vietnam is 32.22498%. This is the average effect of other variables not included
in the model on the social insurance purchase rate of a city or province in Vietnam
in 2020.
 𝛽̂ = -0.7565321: The relationship between insured and lifeexp is negative, which
𝟏
is not supported by theory and goes against the hypothesis. Although the result is
not expected, it can be explained by the fact that a higher life expectancy in a society
can be interpreted as lower mortality coverage charges, reducing the need for
mortality coverage (Dragoș & Dragoș, 2013).
 𝛽̂2 = 0.0004472: The relationship between insured and doc is positive as expected,
which aligns with the results of previous studies. It illustrates that when the number
of doctors in the region increases by 1 person while other factors remain unchanged,
the social insurance purchase rate increases by 0.0004472%. The number of doctors
is an indicator of the accessibility and quality of the healthcare system. An increase
in the number of doctors can be perceived as an improvement in the quality of
healthcare facilities available to potential insurance buyers, hence increasing the
social insurance purchase rate.
 𝛽̂ = 0.0078294: The relationship between insured and avrincome is positive as
3
expected, which is supported by theory. It illustrates that when the average income
per employee increases by 1000 VND, while other factors remain unchanged, the

23
 social insurance purchase rate rises by 0.0078294%. A higher level of income does
not only increase the purchasing power of potential insurance buyers, but also
creates the need to maintain the existing living standards and the wish to generate
wealth for the future, hence raising the social insurance purchase rate.
 𝛽̂𝟒 = 0.5894901: The relationship between insured and educ is positive as expected,
which is in line with theory. It illustrates that when the percentage of trained workers
over the age of 15 increases by 1%, while other factors remain unchanged, the social
insurance purchase rate increases by 0.5894901%. When the percentage of the
educated population in a country increases, the recognition of the importance of
social insurance products also increases, hence raising the social insurance purchase
rate.

𝛽̂𝟓 = -1.881602: The relationship between insured and unemploy is negative as expected,
which is supported by theory. It illustrates that when the unemployment rate increases by
1% while other factors remain unchanged, the social insurance purchase rate decreases by
1.881602%. An increase in the unemployment rate decreases disposable income, which
inevitably decreases the social insurance purchase rate.

2.2. Testing significance of an individual regression coefficient

Using the P-value method, a hypothesis test can be set up as follows:

- H0: 𝛽𝒋 = 0 (the coefficient is not statistically significant)
- H1: 𝛽𝒋 ≠ 0 (the coefficient is statistically significant)

With P-value acquired using the formula: P-value = 2[1 − ɸ(ts)], and a significance level
of ⍺ = 10%, 5% and 1%, the statistical significance of the model’s independent variables
can be tested as follows:

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 Table 6: Testing significance of an individual regression coefficient
Variable P-value ⍺ = 10% ⍺ = 5% ⍺ = 1%

lifeexp = 2[1 − ɸ(-1.54)] P-value > ⍺ P-value > ⍺ P-value > ⍺

≅ 0.129 (0.129 > 0.1) (0.129 > 0.05) (0.129 > 0.01)

There is not enough evidence to reject H0 at significance levels of ⍺ = 10%,

5% and 1%; which means that life expectancy has a statistically
insignificant impact on social insurance purchase rate.

doc = 2[1 − ɸ(-1.54)] P-value > ⍺ P-value > ⍺ P-value > ⍺

≅ 0.842 (0.842 > 0.05) (0.842 > 0.05) (0.842 > 0.05)

There is not enough evidence to reject H0 at significance levels of ⍺ = 10%,

5% and 1%; which means that the number of doctors has a statistically
insignificant impact on social insurance purchase rate.

avrincome = 2[1 − ɸ(-1.54)] P-value < ⍺ P-value < ⍺ P-value < ⍺

≅ 0.000 (0.000 < 0.1) (0.000 < 0.05) (0.000 < 0.01)

There is enough evidence to reject H0 at significance levels of ⍺ = 10%, 5%

and 1%; which means that average income has a statistically significant
impact on social insurance purchase rate.

educ = 2[1 − ɸ(-1.54)] P-value < ⍺ P-value < ⍺ P-value < ⍺

≅ 0.000 (0.000 < 0.1) (0.000 < 0.05) (0.000 < 0.01)

There is enough evidence to reject H0 at significance levels of ⍺ = 10%, 5%

and 1%; which means that education has a statistically significant impact on
social insurance purchase rate.

unemploy = 2[1 − ɸ(-1.54)] P-value < ⍺ P-value < ⍺ P-value < ⍺

≅ 0.005 (0.005 < 0.1) (0.005 < 0.05) (0.005 < 0.01)

There is enough evidence to reject H0 at significance levels of ⍺ = 10%, 5%

and 1%; which means that unemployment rate has a statistically significant
impact on social insurance purchase rate.

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Conclusion: At ⍺ = 10%, 5% and 1%, the variables lifeexp and doc are statistically
insignificant; while the variables avrincome, educ and unemploy of the regression model
are statistically significant.

2.3. Testing overall significance of the model

Using the Wald test, a hypothesis can be established as follows:

- H0: 𝛽𝟏 = 𝛽𝟐 = 𝜷𝟑 = 𝛽𝟒 = 𝛽𝟓 = 0
- H1: 𝛽𝟏𝟐 + 𝛽𝟐𝟐 + 𝛽𝟑𝟐 + 𝛽𝟒𝟐 + 𝛽𝟓𝟐 ≠ 0

It can be rewritten as:

- H0: 𝑹𝟐 = 0 (the model has no meaning)
- H1: 𝑹𝟐 ≠ 0 (the model has meaning)
In which 𝑹𝟐 is the extent to which the variance in the dependent variable can be explained
by the independent variables. In this case, 78.75% of the total variation in social insurance
purchase rate is jointly explained by life expectancy, the number of doctors, the percentage
of trained workers, and the unemployment rate.

The F-statistic is obtained using the following formula:

𝑹𝟐 /𝒌
Fs = = 42.153176
(𝟏 − 𝑹𝟐 ) / (𝒏 − 𝒌 − 𝟏)

● At ⍺ = 5%, 𝐹𝑠 > 𝐹𝛼 (𝑘, 𝑛 − 𝑘 − 1) (45.15 > 𝐹0.05 (5, 57) = 2.37) and there is enough
evidence to reject H0, which means that the model is statistically significant at 5%
significance level.
● At ⍺ = 1%, 𝐹𝑠 > 𝐹𝛼 (𝑘, 𝑛 − 𝑘 − 1) (45.15 > 𝐹0.01 (5, 57) = 3.34) and there is enough
evidence to reject H0, which means that the model is statistically significant at 1%
significance level.
● At ⍺ = 0.1%, 𝐹𝑠 > 𝐹𝛼 (𝑘, 𝑛 − 𝑘 − 1) (45.15 > 𝐹0.001 (5, 57) = 4.76) and there is
enough evidence to reject H0, which means that the model is statistically significant
at 0.1% significance level.

Conclusion: The model is statistically significant at significance levels of ⍺ = 5%, 1% and

0.1%

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3. Policy implications

Table 7: Social insurance purchase rate in Vietnam, 2016 - 2021

2016 2017 2018 2019 2020 2021
Social insurance
24.0 25.2 26.6 28.3 29.5 32.7
purchase rate (%)

Social insurance is a form of government intervention to protect individuals from adverse

risks; such as workplace injuries, unemployment, or retirement. Its purchase rate is,
therefore, an indicator of social welfare in developing and developed nations (Chetty &
Finkelstein, 2013). In Vietnam, despite the constant increase in the social insurance
purchase rate in recent years, non-participation in the program has been relatively high,
posing a threat to the population’s well-being, especially that of disadvantaged people
(Ribar, 2014).

Thus, it is important for the Vietnam government to aim to increase the social insurance
purchase rate. The regression model above suggested that average income and worker
training have a significantly positive impact on the insurance participation rate, while the
unemployment rate negatively affects the figure. Therefore, a number of policies regarding
each of these determinants can be suggested to remove potential barriers and improve
participation in social insurance programs.

● Average income: It has been established that raising average income would
contribute to increasing the social insurance participation rate. Therefore, the
government should implement policies regarding employers’ compliance with the
minimum wage law and employee rights’ protocols. Further legislation should also
be established to narrow wealth disparity and subsidise low-wage employees.

● Worker training: Implementing worker training programs can increase social

insurance participation, not only directly through providing information on the
importance of social insurance; but also indirectly through enhancing the
competency and skills of the working population, which contributes to raising their
income and lowering the unemployment rate. Policies to improve recognition of the
value of social insurance should also be accompanied by stricter policies, such as
expanding compulsory insurance coverage.

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● Unemployment rate: Policies regarding this determinant do not necessarily have to
be associated with lowering the unemployment rate, especially lowering it below
the economically favourable level. Instead, the government should aim to enhance
job security, as well as develop unemployment insurance and other policies to
financially support unemployed people in finding a new job.

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 CONCLUSION
Social insurance is a part of the social assistance program provided by the Vietnam
government to protect its participants’ financial and overall well-being from adverse
shocks. However, despite many efforts in recent years from the government to increase
participation, the purchase rate among eligible households and individuals remains lower
than desirable, especially in specific regions of Vietnam. Therefore, the aim of this report
is to test whether certain socioeconomic indicators have a significant impact on the social
insurance purchase rate in provinces in Vietnam.

Using the data-analysing software STATA to estimate the model, it is concluded that two
of the variables (average income and education) have a positive impact on the purchase
rate, while one variable (unemployment rate) has a negative impact on the rate.
Furthermore, the coefficients of these variables align with the theoretical framework.
Meanwhile, the remaining variables (life expectancy and the number of doctors) have
insignificant impact on insurance participation.

It is suggested that further research regarding the determinants of the social insurance
purchase rate in Vietnam should be conducted to increase the number of independent
variables, expand the period of study, or test different types of models. This would
contribute to gaining a more comprehensive understanding of the social insurance system
in Vietnam.

There are also inevitable limitations associated with this study, some of which present
prospective research opportunities. The theoretical framework was predominantly based
on the international context, which can have particular differences from the circumstances
in Vietnam. This may lead to certain flaws in the phases of choosing variables, collecting
data and interpreting the results.

Despite such drawbacks, the group has made great efforts to deliver a report with the best
quality within our time and ability. We would like to express our sincere gratitude to our
instructor, Dr. Đinh Thanh Bình, for her dedicated instruction during the course; and hope
to receive feedback to improve our report.

29
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Journal of Risk and Insurance, 60: 616-634.
Chetty, R. & Finkelstein, A. (2013) 'Social Insurance: Connecting Theory to data,'
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444-53759-1.00003-0.
Dragoș, S.L. & Dragoș, C.M. (2013) 'The Role of Institutional Factors over the National
Insurance Demand: Theoretical Approach and Econometric Estimations,'
Transylvanian Review of Administrative Sciences, 9(39), pp. 32–45.
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American Statistical Association, 91(436), p. 1750.
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Feyen, E., Lester, R. & Rocha, R. (2011) ‘What drives the development of the insurance
sector? An empirical analysis based on a panel of developed and developing
countries’, World Bank policy research working paper.
https://doi.org/10.1596/1813-9450-5572.
Hwang, T. and Gao, S.S. (2003) 'The determinants of the demand for life insurance in an
emerging economy – the case of China,' Managerial Finance, 29(5/6), pp. 82–96.
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 Data,' Social Science Research Network [Preprint].
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Ribar, D.C. (2014) 'How to improve participation in social assistance programs,' IZA World
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https://doi.org/10.2307/253306.

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 APPENDIX: DATASET

No. City/Province insured lifeexp doc avrincome educ unemploy

1 An Giang 13.3 73.77 1.348 5176.9 13.86 2.53
2 Ba Ria - Vung Tau 35.7 76.47 614 6437.7 30.07 3.56
3 Bac Lieu 9.5 74.72 830 5237.1 10.27 3.48
4 Bac Giang 30.5 73.45 1.862 5416.5 19.83 0.79
5 Bac Kan 14.5 72.58 465 2620.4 16.32 0.88
6 Bac Ninh 57.9 74.05 1.222 6948.6 27.8 2.19
7 Ben Tre 12.9 75.61 939 4521.3 12.56 2.16
8 Binh Duong 63.7 74.75 1.271 7689.2 20.13 3.31
9 Binh Dinh 15.2 73.51 1.154 4856.4 21.8 2.85
10 Binh Phuoc 23.9 73.95 424 5572.5 18.06 2.93
11 Binh Thuan 14.6 74.56 588 5403.8 15.66 2.86
12 Ca Mau 12.2 75.31 1.174 5227.2 13.02 2.27
13 Cao Bang 14 70.56 963 2166.4 21.8 0.96
14 Can Tho 20.4 75.97 1.322 5338.9 20.6 3.6
15 Da Nang 39.3 76.27 2.48 6598.2 44.04 9.41
16 Dak Lak 10.4 70.99 1.39 4112.2 17.2 2.2
17 Dak Nong 11.4 70.12 469 3785 14.33 1.79
18 Dien Bien 14 68.44 718 2477.2 16.2 0.45
19 Dong Nai 47.4 76.3 2.211 7772.5 22.5 1.86
20 Dong Thap 12.5 74.88 1.435 5130.4 14.97 2.79
21 Gia Lai 10.1 70.07 1.63 3834.1 14.9 1.76
22 Ha Giang 10 68.4 961 2308.3 12.81 1.03
23 Ha Nam 31.9 74.7 528 5003.1 22.05 1.76
24 Ha Noi 44.7 75.47 4.911 7090.1 48.5 2.11
25 Ha Tinh 16.8 72.59 1.193 3624.4 25.7 3.18
26 Hai Duong 38.5 74.83 1.305 5818.7 24.77 1.7
27 Hai Phong 41.1 74.54 2.108 6442.5 34.7 2.37
28 Hau Giang 17.2 75.53 559 4338.3 14.23 3.05
29 Hoa Binh 16.1 72.6 674 3607.5 18.62 0.44
30 Hung Yen 31.4 74.7 738 5704.9 26.35 2.67
31 Khanh Hoa 21.8 73.52 975 5089.2 23.88 4.7
32 Kien Giang 12.9 74.45 1.556 5290.4 14.76 4.35
33 Kon Tum 14.7 67.65 491 3921.2 15.98 1.05
34 Lai Chau 12.3 66.69 455 2500.4 12.53 0.42
35 Lang Son 13.5 72.42 764 3408.4 21 1.84

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36 Lao Cai 15 69.26 811 3754.3 20.99 1.62
37 Lam Dong 12.8 73.29 929 4737.6 18.5 0.98
38 Long An 34.1 75.61 1.34 5909.3 15.93 2.15
39 Nam Dinh 20.4 74.55 982 4413.8 20.07 1.68
40 Nghe An 16.3 73.09 3.492 4468.4 20.76 1.26
41 Ninh Binh 25.5 74.17 922 4687.7 30.16 1.36
42 Ninh Thuan 13.4 72.92 494 4110 16.16 3.32
43 Phu Tho 23.3 73.44 1.873 4248.8 25.17 1.47
44 Phu Yen 13.8 73.57 589 4337.4 17.52 2.76
45 Quang Binh 18.1 72.65 741 4300.2 21.87 3.49
46 Quang Nam 21.3 73.04 1.758 4640.7 21.49 4.09
47 Quang Ngai 16.8 72.37 1.759 4580.6 22.03 3.19
48 Quang Ninh 36.8 73.43 728 5667.2 38.65 3.22
49 Quang Tri 18.9 68.17 282 4035.9 25.6 3.93
50 Soc Trang 12.4 74.35 709 4526.9 15.17 2.1
51 Son La 11.1 70.96 1.124 2729.6 13.1 0.67
52 Tay Ninh 32.4 74.74 489 6036.7 14.7 1.72
53 Thai Binh 20.2 74.91 1.992 4948.3 17.89 1.24
54 Thai Nguyen 30.7 73.68 1.246 4643.1 28.24 1.7
55 Thai Hoa 18.7 73.42 3.34 4765.7 21.39 1.87
56 Thua Thien Hue 23 71.71 941 4628.1 23.15 4.29
57 Tien Giang 18.8 76.12 1.36 5685.8 14.2 3.14
58 Ho Chi Minh City 51.2 76.46 11.689 8486.3 38.71 3.91
59 Tra Vinh 12.8 74.77 1.95 4228.7 11.56 2.22
60 Tuyen Quang 13.8 72.28 504 3270.4 21.32 1.4
61 Vinh Long 18.2 75.57 863 3966.2 15.79 2.67
62 Vinh Phuc 35.9 74 1.345 5753.9 28.59 2.09
63 Yen Bai 13.1 69.56 807 3485.7 19.09 0.73
Source: General Statistics Office of Vietnam

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