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A dynamic model of demand for private health insurance in Ireland by and

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  • Claire Finn

    (School of Economics & Geary Institute, University College Dublin)

  • Colm Harmon

    (School of Economics, Geary Institute & IZA Bonn, University College Dublin)

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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File URL: http://www.ucd.ie/geary/static/publications/workingpapers/gearywp200612.pdf
File Function: First version, 2006
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Bibliographic Info

Paper provided by Geary Institute, University College Dublin in its series Working Papers with number 200612.

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Length: 39 pages
Date of creation: 23 Nov 2006
Date of revision:
Handle: RePEc:ucd:wpaper:200612

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

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References

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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.
  2. 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.
  3. Daniel S. Hamermesh, 2004. "Subjective Outcomes in Economics," NBER Working Papers 10361, National Bureau of Economic Research, Inc.
  4. 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.
  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. 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.
  7. Watson, Dorothy & Williams, James & Kinsella, Ray, 2001. "Perceptions of the Quality of Health Care in the Public and Private Sectors in Ireland: Report to the Centre for Insurance Studies Graduate Business School, UCD," Research Series, Economic and Social Research Institute (ESRI), number BMI163, September.
  8. Andrew M. Jones, 2012. "health econometrics," The New Palgrave Dictionary of Economics, Palgrave Macmillan.
  9. 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.
  10. 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.
  11. 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.
  12. Arulampalam, Wiji & Booth, Alison L & Taylor, Mark P, 2000. "Unemployment Persistence," Oxford Economic Papers, Oxford University Press, vol. 52(1), pages 24-50, January.
  13. Besley, T. & Coate, S., 1989. "Public Provision Of Private Goods And The Redistribution Of Income," Papers 36, Princeton, Woodrow Wilson School - Discussion Paper.
  14. 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.
  15. Nolan, Brian, 2004. "Health Insurance in Ireland: Issues and Challenges," Papers HRBWP10, Economic and Social Research Institute (ESRI).
  16. Michael Grossman, 1999. "The Human Capital Model of the Demand for Health," NBER Working Papers 7078, National Bureau of Economic Research, Inc.
  17. 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.
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