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Analysis of Adverse Selection and Moral Hazard in the Health Insurance Market of Iran

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  • GholamReza Keshavarz Haddad

    (Graduate School of Management and Economics, Sharif University of Technology)

  • Mahdieh Zomorrodi Anbaji

    (Graduate School of Management and Economics, Sharif University of Technology)

Abstract

This paper aims to estimate a demand model for health insurance and medical care in Iran, in the presence of heterogeneous and latent health status of individuals; moreover it tests the asymmetry of information in the health insurance market. Our data set have been taken from the Households’ expenditures survey (2006) of Iran. Parameters of the model are estimated by the Generalized Method of Moments (GMM) and the presence of asymmetric information (adverse selection and moral hazard) is tested by a non-parametric econometric method. The analytical model is specified under minimal assumptions on the selection process of different insurance categories and the statistical distribution of individual's latent health status. The findings confirm the presence of adverse selection hypothesis in personally purchased health insurance and moral hazard in all health insurance categories.

Suggested Citation

  • GholamReza Keshavarz Haddad & Mahdieh Zomorrodi Anbaji, 2010. "Analysis of Adverse Selection and Moral Hazard in the Health Insurance Market of Iran," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 35(4), pages 581-599, October.
    • Handle: RePEc:pal:gpprii:v:35:y:2010:i:4:d:10.1057_gpp.2010.20
    DOI: 10.1057/gpp.2010.20
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