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A dynamic model of demand for private health insurance in Ireland

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  • Finn, Claire

    (UCD)

  • Harmon, Colm

    (UCD)

Abstract

The Irish health care system offers a tax financed, universal entitlement to public care at a nominal user fee, nonetheless 50% of the Irish population purchase private health insurance. This paper empirically models the propensity to insure as a function of individual and household characteristics using panel data analysis and compares three alternate approaches; a static, chamberlain-mundlak and dynamic specification. Using panel data from 1994 to 2000, we consider whether propensity to insure is in fact a function of heterogeneity or of state dependence. A range of individual and household characteristics is shown to influence propensity to insure. Overall the positive effect of education and income and the negative effect of poor heath status remain robust across three specifications. In moving toward a dynamic specification, we show that persistence is a highly significant determinant of demand for private health insurance and also that it reduces the size of the coefficients on the regressors. The latter point highlights that while education, income and, to a lesser extent, health status have very large effects on probability of insuring, these effects are overestimated where no attempt is made to control for unobserved heterogeneity or state dependence.

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Bibliographic Info

Paper provided by Economic and Social Research Institute (ESRI) in its series Papers with number HRBWP17.

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Length: 39 pages
Date of creation: Nov 2006
Date of revision:
Handle: RePEc:esr:wpaper:hrb17

Note: Published by ESRI, ISSC & University of Ulster
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  1. Nolan, Brian, 2004. "Health Insurance in Ireland: Issues and Challenges," Papers HRBWP10, Economic and Social Research Institute (ESRI).
  2. Andrew M. Jones, 2012. "health econometrics," The New Palgrave Dictionary of Economics, Palgrave Macmillan.
  3. Daniel S. Hamermesh, 2004. "Subjective Outcomes in Economics," Southern Economic Journal, Southern Economic Association, vol. 71(1), pages 2-11, July.
  4. Feldstein, Martin S, 1973. "The Welfare Loss of Excess Health Insurance," Journal of Political Economy, University of Chicago Press, vol. 81(2), pages 251-80, Part I, M.
  5. Propper, Carol, 2000. "The demand for private health care in the UK," Journal of Health Economics, Elsevier, vol. 19(6), pages 855-876, November.
  6. Denise Doiron & Glenn Jones & Elizabeth Savage, 2008. "Healthy, wealthy and insured? The role of self-assessed health in the demand for private health insurance," Health Economics, John Wiley & Sons, Ltd., vol. 17(3), pages 317-334.
  7. Besley, Timothy & Coate, Stephen, 1991. "Public Provision of Private Goods and the Redistribution of Income," American Economic Review, American Economic Association, vol. 81(4), pages 979-84, September.
  8. Colm Harmon & Brian Nolan, 2001. "Health insurance and health services utilization in Ireland," Health Economics, John Wiley & Sons, Ltd., vol. 10(2), pages 135-145.
  9. Grossman, Michael, 1972. "On the Concept of Health Capital and the Demand for Health," Journal of Political Economy, University of Chicago Press, vol. 80(2), pages 223-55, March-Apr.
  10. Besley, Timothy & Hall, John & Preston, Ian, 1998. "Private and public health insurance in the UK," European Economic Review, Elsevier, vol. 42(3-5), pages 491-497, May.
  11. Arulampalam, Wiji & Booth, Alison L & Taylor, Mark P, 2000. "Unemployment Persistence," Oxford Economic Papers, Oxford University Press, vol. 52(1), pages 24-50, January.
  12. Chamberlain, Gary, 1984. "Panel data," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 2, chapter 22, pages 1247-1318 Elsevier.
  13. Tim Besley & John Hall & Ian Preston, 1996. "The demand for private health insurance: do waiting lists matter?," IFS Working Papers W96/07, Institute for Fiscal Studies.
  14. Michael Grossman, 1999. "The Human Capital Model of the Demand for Health," NBER Working Papers 7078, National Bureau of Economic Research, Inc.
  15. Mundlak, Yair, 1978. "On the Pooling of Time Series and Cross Section Data," Econometrica, Econometric Society, vol. 46(1), pages 69-85, January.
  16. Becker, Gary S & Mulligan, Casey B, 1997. "The Endogenous Determination of Time Preference," The Quarterly Journal of Economics, MIT Press, vol. 112(3), pages 729-58, August.
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