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Moral hazard and selection among the poor: Evidence from a randomized experiment

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  • Spenkuch, Jörg L.

Abstract

Not only does economic theory predict high-risk individuals to be more likely to purchase insurance, but insurance coverage is also thought to crowd out precautionary activities. In spite of stark theoretical predictions, there is conflicting empirical evidence on adverse selection, and evidence on ex ante moral hazard is very scarce. Using data from the Seguro Popular Experiment in Mexico, this paper documents patterns of selection on observables into health insurance as well as the existence of non-negligible ex ante moral hazard. More specifically, the findings indicate that (i) agents in poor self-assessed health prior to the intervention have, all else equal, a higher propensity to take up insurance; and (ii) insurance coverage reduces the demand for self-protection in the form of preventive care. Curiously, however, individuals do not sort based on objective measures of their health.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Health Economics.

Volume (Year): 31 (2012)
Issue (Month): 1 ()
Pages: 72-85

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Handle: RePEc:eee:jhecon:v:31:y:2012:i:1:p:72-85

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Web page: http://www.elsevier.com/locate/inca/505560

Related research

Keywords: Health insurance; Adverse selection; Moral hazard; Self-protection; Seguro Popular;

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Cited by:
  1. Boris Augurzky & Thomas K. Bauer & Arndt R. Reichert & Christoph M. Schmidt & Harald Tauchmann, 2012. "Does Money Burn Fat? – Evidence from a Randomized Experiment," Ruhr Economic Papers 0368, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  2. Arndt Reichert, 2012. "Obesity, Weight Loss, and Employment Prospects – Evidence from a Randomized Trial," Ruhr Economic Papers 0381, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.

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