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A Dynamic Model of Demand for Private Health Insurance in Ireland

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Author Info
Claire Finn () (University College Dublin)
Colm Harmon () (University College Dublin and IZA Bonn)

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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 health 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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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2472.

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Length: 40 pages
Date of creation: Nov 2006
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Handle: RePEc:iza:izadps:dp2472

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Related research
Keywords: health insurance; dynamics; panel; unobserved heterogeneity; state dependence;

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Find related papers by JEL classification:
G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies
I10 - Health, Education, and Welfare - - Health - - - General
D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles

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  1. Mundlak, Yair, 1978. "On the Pooling of Time Series and Cross Section Data," Econometrica, Econometric Society, vol. 46(1), pages 69-85, January. [Downloadable!] (restricted)
  2. 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. [Downloadable!] (restricted)
  3. Hopkins, Sandra & Kidd, Michael P, 1996. "The Determinants of the Demand for Private Health Insurance under Medicare," Applied Economics, Taylor and Francis Journals, vol. 28(12), pages 1623-32, December. [Downloadable!] (restricted)
  4. Besley, Timothy & Hall, John & Preston, Ian, 1999. "The demand for private health insurance: do waiting lists matter?," Journal of Public Economics, Elsevier, vol. 72(2), pages 155-181, May. [Downloadable!] (restricted)
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  5. 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. [Downloadable!] (restricted)
  6. Propper, Carol, 1989. "An Econometric Analysis of the Demand for Private Health Insurance in England and Wales," Applied Economics, Taylor and Francis Journals, vol. 21(6), pages 777-92, June.
  7. Daniel S. Hamermesh, 2004. "Subjective Outcomes in Economics," NBER Working Papers 10361, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  8. Propper, Carol, 2000. "The demand for private health care in the UK," Journal of Health Economics, Elsevier, vol. 19(6), pages 855-876, November. [Downloadable!] (restricted)
  9. 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. [Downloadable!] (restricted)
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  10. 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. [Downloadable!]
  11. 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. [Downloadable!] (restricted)
  12. 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. [Downloadable!] (restricted)
  13. 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.
  14. Wiji Arulampalam & Alison Booth & Mark P. Taylor, 1998. "Unemployment Persistence," ILR working papers 019, Institute for Labour Research. [Downloadable!]
    Other versions:
  15. Nolan, Brian, 2004. "Health Insurance in Ireland: Issues and Challenges," Papers HRBWP10, Economic and Social Research Institute (ESRI). [Downloadable!]
  16. Michael Grossman, 1999. "The Human Capital Model of the Demand for Health," NBER Working Papers 7078, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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