IDEAS home Printed from https://ideas.repec.org/p/chy/respap/188chedp.html
   My bibliography  Save this paper

Theoretical insights into the development of health insurance in low-income countries

Author

Listed:
  • Matthew Jowett

Abstract

This Discussion Paper is concerned with the development of risk-sharing systems for health, in low- and middle-income countries. It questions whether insurance theory developed in wealthier economies, in particular the central ideas of adverse selection and moral hazard, has relevance in the context of poorer countries with high levels of unmet health needs, and low utilisation of health services. Empirical evidence on these two issues is reviewed, as is the debate around social capital and collective action, and its relevance to extending risk sharing in poorer countries. Drawing on thinking and evidence from development economics, it is argued that informal risksharing may crowd-out formal risk-sharing schemes, the reverse of arguments found in much of the literature. Rooted in a holistic framework of household risk-reducing strategies, the paper considers the dynamic of demand for insurance in poorer countries, influenced by factors such as social cohesion, perceived corruption, and duty to the state. A central argument in the paper is that much of the literature on health insurance in low-income countries fails to consider well-developed and highly relevant bodies of literature in development economics and sociology.

Suggested Citation

  • Matthew Jowett, 2004. "Theoretical insights into the development of health insurance in low-income countries," Working Papers 188chedp, Centre for Health Economics, University of York.
  • Handle: RePEc:chy:respap:188chedp
    as

    Download full text from publisher

    File URL: http://www.york.ac.uk/media/che/documents/papers/discussionpapers/CHE%20Discussion%20Paper%20188.pdf
    File Function: First version, 2004
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Rosenzweig, Mark R, 1988. "Risk, Implicit Contracts and the Family in Rural Areas of Low-income Countries," Economic Journal, Royal Economic Society, vol. 98(393), pages 1148-1170, December.
    2. Wolfe, John R. & Goddeeris, John H., 1991. "Adverse selection, moral hazard, and wealth effects in the medigap insurance market," Journal of Health Economics, Elsevier, vol. 10(4), pages 433-459.
    3. Winnie Yip & Peter Berman, 2001. "Targeted health insurance in a low income country and its impact on access and equity in access: Egypt's school health insurance," Health Economics, John Wiley & Sons, Ltd., vol. 10(3), pages 207-220, April.
    4. Besley, Timothy & Coate, Stephen & Loury, Glenn, 1993. "The Economics of Rotating Savings and Credit Associations," American Economic Review, American Economic Association, vol. 83(4), pages 792-810, September.
    5. Propper, Carol, 1993. "Constrained choice sets in the U.K. demand for private medical insurance," Journal of Public Economics, Elsevier, vol. 51(3), pages 287-307, July.
    6. Manning, Willard G, et al, 1987. "Health Insurance and the Demand for Medical Care: Evidence from a Randomized Experiment," American Economic Review, American Economic Association, vol. 77(3), pages 251-277, June.
    7. David M. Dror & Alexander S. Preker, 2002. "Social Reinsurance : A New Approach to Sustainable Community Health Financing," World Bank Publications - Books, The World Bank Group, number 15211.
    8. Ron, Aviva, 1999. "NGOs in community health insurance schemes: examples from Guatemala and the Philippines," Social Science & Medicine, Elsevier, vol. 48(7), pages 939-950, April.
    9. Marquis, M Susan & Phelps, Charles E, 1987. "Price Elasticity and Adverse Selection in the Demand for Supplementary Health Insurance," Economic Inquiry, Western Economic Association International, vol. 25(2), pages 299-313, April.
    10. Levin, Laurence, 1995. "Demand for health insurance and precautionary motives for savings among the elderly," Journal of Public Economics, Elsevier, vol. 57(3), pages 337-367, July.
    11. Joel Sobel, 2002. "Can We Trust Social Capital?," Journal of Economic Literature, American Economic Association, vol. 40(1), pages 139-154, March.
    12. Andrew D. Foster & Mark R. Rosenzweig, 2001. "Imperfect Commitment, Altruism, And The Family: Evidence From Transfer Behavior In Low-Income Rural Areas," The Review of Economics and Statistics, MIT Press, vol. 83(3), pages 389-407, August.
    13. Grimard, Franque, 1997. "Household consumption smoothing through ethnic ties: evidence from Cote d'Ivoire," Journal of Development Economics, Elsevier, vol. 53(2), pages 391-422, August.
    14. Besley, Timothy & Coate, Stephen, 1995. "Group lending, repayment incentives and social collateral," Journal of Development Economics, Elsevier, vol. 46(1), pages 1-18, February.
    15. Cutler, David M. & Zeckhauser, Richard J., 2000. "The anatomy of health insurance," Handbook of Health Economics, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 11, pages 563-643, Elsevier.
    16. Bouman, F. J. A., 1995. "Rotating and accumulating savings and credit associations: A development perspective," World Development, Elsevier, vol. 23(3), pages 371-384, March.
    17. Zweifel, Peter & Manning, Willard G., 2000. "Moral hazard and consumer incentives in health care," Handbook of Health Economics, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 8, pages 409-459, Elsevier.
    18. Ligon, Ethan, 2004. "Targeting and Informal Insurance," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt4km8q3gv, Department of Agricultural & Resource Economics, UC Berkeley.
    19. Dufwenberg, Martin & Lundholm, Michael, 2001. "Social Norms and Moral Hazard," Economic Journal, Royal Economic Society, vol. 111(473), pages 506-525, July.
    20. MR Rosenzweig, 2001. "Savings behaviour in low-income countries," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 17(1), pages 40-54, Spring.
    21. Stefan Dercon, 2002. "Income Risk, Coping Strategies, and Safety Nets," The World Bank Research Observer, World Bank, vol. 17(2), pages 141-166, September.
    22. Levenson, Alec R. & Besley, Timothy, 1996. "The anatomy of an informal financial market: Rosca participation in Taiwan," Journal of Development Economics, Elsevier, vol. 51(1), pages 45-68, October.
    23. Kutzin, Joseph & Barnum, Howard, 1992. "How health insurance affects the delivery of health care in developing countries," Policy Research Working Paper Series 852, The World Bank.
    24. 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 223-255, March-Apr.
    25. Hugh R. Waters, 1999. "Measuring the impact of health insurance with a correction for selection bias-a case study of Ecuador," Health Economics, John Wiley & Sons, Ltd., vol. 8(5), pages 473-483.
    26. Xingyuan, Gu & Bloom, Gerald & Shenglan, Tang & Yingya, Zhu & Shouqi, Zhou & Xingbao, Chen, 1993. "Financing health care in rural China: Preliminary report of a nationwide study," Social Science & Medicine, Elsevier, vol. 36(4), pages 385-391, February.
    27. A. C. Cameron & P. K. Trivedi & Frank Milne & J. Piggott, 1988. "A Microeconometric Model of the Demand for Health Care and Health Insurance in Australia," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 55(1), pages 85-106.
    28. Besley, Timothy, 1989. "The Demand for Health Care and Health Insurance," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 5(1), pages 21-33, Spring.
    29. Asenso-Okyere, W. Kwadwo & Osei-Akoto, Isaac & Anum, Adote & Appiah, Ernest N., 1997. "Willingness to pay for health insurance in a developing economy. A pilot study of the informal sector of Ghana using contingent valuation," Health Policy, Elsevier, vol. 42(3), pages 223-237, December.
    30. Cox, Donald C & Jimenez, Emmanuel, 1992. "Social Security and Private Transfers in Developing Countries: The Case of Peru," The World Bank Economic Review, World Bank, vol. 6(1), pages 155-169, January.
    31. Jowett, M. & Contoyannis, P. & Vinh, N. D., 2003. "The impact of public voluntary health insurance on private health expenditures in Vietnam," Social Science & Medicine, Elsevier, vol. 56(2), pages 333-342, January.
    32. Morduch, Jonathan, 1999. "Between the State and the Market: Can Informal Insurance Patch the Safety Net?," The World Bank Research Observer, World Bank, vol. 14(2), pages 187-207, August.
    33. Ethan Ligon, 2002. "Targeting and Informal Insurance," WIDER Working Paper Series DP2002-08, World Institute for Development Economic Research (UNU-WIDER).
    34. Attanasio, Orazio & Rios-Rull, Jose-Victor, 2000. "Consumption smoothing in island economies: Can public insurance reduce welfare?," European Economic Review, Elsevier, vol. 44(7), pages 1225-1258, June.
    35. Geil, Peter, et al, 1997. "Economic Incentives and Hospitalization in Germany," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 12(3), pages 295-311, May-June.
    36. Timothy Besley, 1995. "Nonmarket Institutions for Credit and Risk Sharing in Low-Income Countries," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 115-127, Summer.
    37. Arnott, Richard & Stiglitz, Joseph E, 1991. "Moral Hazard and Nonmarket Institutions: Dysfunctional Crowding Out or Peer Monitoring?," American Economic Review, American Economic Association, vol. 81(1), pages 179-190, March.
    38. Narayan, Deepa & Pritchett, Lant, 1999. "Cents and Sociability: Household Income and Social Capital in Rural Tanzania," Economic Development and Cultural Change, University of Chicago Press, vol. 47(4), pages 871-897, July.
    39. Calomiris, Charles W. & Rajaraman, Indira, 1998. "The role of ROSCAs: lumpy durables or event insurance?," Journal of Development Economics, Elsevier, vol. 56(1), pages 207-216, June.
    40. Ensor, Tim & Witter, Sophie, 2001. "Health economics in low income countries: adapting to the reality of the unofficial economy," Health Policy, Elsevier, vol. 57(1), pages 1-13, July.
    41. Besley, Timothy, 1995. "Savings, credit and insurance," Handbook of Development Economics, in: Hollis Chenery & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 3, chapter 36, pages 2123-2207, Elsevier.
    42. Pedro Albarran & Orazio P. Attanasio, 2002. "Do Public Transfers Crowd Out Private Transfers?: Evidence from a Randomized Experiment in Mexico," WIDER Working Paper Series DP2002-06, World Institute for Development Economic Research (UNU-WIDER).
    43. David M. Dror & Christian Jacquier, 1999. "Micro‐insurance: Extending Health Insurance to the Excluded," International Social Security Review, John Wiley & Sons, vol. 52(1), pages 71-97.
    44. George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 84(3), pages 488-500.
    45. Atim, Chris, 1999. "Social movements and health insurance: a critical evaluation of voluntary, non-profit insurance schemes with case studies from Ghana and Cameroon," Social Science & Medicine, Elsevier, vol. 48(7), pages 881-896, April.
    46. Desmet, M. & Chowdhury, A. Q. & Islam, Md. K., 1999. "The potential for social mobilisation in Bangladesh: the organisation and functioning of two health insurance schemes," Social Science & Medicine, Elsevier, vol. 48(7), pages 925-938, April.
    47. Ensor, Tim, 1999. "Developing health insurance in transitional Asia," Social Science & Medicine, Elsevier, vol. 48(7), pages 871-879, April.
    48. Cameron, A. Colin & Trivedi, Pravin K., 1991. "The role of income and health risk in the choice of health insurance : Evidence from Australia," Journal of Public Economics, Elsevier, vol. 45(1), pages 1-28, June.
    49. Carol Propper, 1987. "An econometric estimation of the demand for private health insurance," Working Papers 024chedp, Centre for Health Economics, University of York.
    50. Nyman, John A., 1999. "The value of health insurance: the access motive," Journal of Health Economics, Elsevier, vol. 18(2), pages 141-152, April.
    51. Wydick, Bruce, 1999. "Can Social Cohesion Be Harnessed to Repair Market Failures? Evidence from Group Lending in Guatemala," Economic Journal, Royal Economic Society, vol. 109(457), pages 463-475, July.
    52. Mark V. Pauly, 1974. "Overinsurance and Public Provision of Insurance: The Roles of Moral Hazard and Adverse Selection," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 88(1), pages 44-62.
    53. Carrin, Guy & Ron, Aviva & Hui, Yang & Hong, Wang & Tuohong, Zhang & Licheng, Zhang & Shuo, Zhang & Yide, Ye & Jiaying, Chen & Qicheng, Jiang & Zhaoyang, Zhang & Jun, Yu & Xuesheng, Li, 1999. "The reform of the rural cooperative medical system in the People's Republic of China: interim experience in 14 pilot counties," Social Science & Medicine, Elsevier, vol. 48(7), pages 961-972, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Gowokani Chijere Chirwa & Marc Suhrcke & Rodrigo Moreno-Serra, 2020. "The Impact of Ghana’s National Health Insurance on Psychological Distress," Applied Health Economics and Health Policy, Springer, vol. 18(2), pages 249-259, April.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Matthew Jowett & Anil Deolalikar & Peter Martinsson, 2004. "Health insurance and treatment seeking behaviour: evidence from a low‐income country," Health Economics, John Wiley & Sons, Ltd., vol. 13(9), pages 845-857, September.
    2. Stefan Dercon, 2002. "Income Risk, Coping Strategies, and Safety Nets," The World Bank Research Observer, World Bank, vol. 17(2), pages 141-166, September.
    3. Sengupta, Reshmi & Rooj, Debasis, 2019. "The effect of health insurance on hospitalization: Identification of adverse selection, moral hazard and the vulnerable population in the Indian healthcare market," World Development, Elsevier, vol. 122(C), pages 110-129.
    4. Zulkefli, Zurina & jones, Glenn, 2012. "Moral Hazard and the Impact of Private Health Insurance on the Utilisation of Health Care in Malaysia," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 46(2), pages 159-175.
    5. Sepehri, Ardeshir & Simpson, Wayne & Sarma, Sisira, 2006. "The influence of health insurance on hospital admission and length of stay--The case of Vietnam," Social Science & Medicine, Elsevier, vol. 63(7), pages 1757-1770, October.
    6. Czura, Kristina & Klonner, Stefan, 2023. "Financial market responses to a natural disaster: Evidence from credit networks and the Indian Ocean tsunami," Journal of Development Economics, Elsevier, vol. 160(C).
    7. Karlan, Dean & Morduch, Jonathan, 2010. "Access to Finance," Handbook of Development Economics, in: Dani Rodrik & Mark Rosenzweig (ed.), Handbook of Development Economics, edition 1, volume 5, chapter 0, pages 4703-4784, Elsevier.
    8. Hullegie, P.G.J., 2012. "Essays on health and labor economics," Other publications TiSEM dcc68fc9-7af1-4ba9-8f90-6, Tilburg University, School of Economics and Management.
    9. Monica Ospina, 2010. "CCT programs for consumption insurance: evidence from Colombia," Documentos de Trabajo de Valor Público 10612, Universidad EAFIT.
    10. Ambec, Stefan & Treich, Nicolas, 2007. "Roscas as financial agreements to cope with self-control problems," Journal of Development Economics, Elsevier, vol. 82(1), pages 120-137, January.
    11. K. P. M. Winssen & R. C. Kleef & W. P. M. M. Ven, 2017. "A voluntary deductible in health insurance: the more years you opt for it, the lower your premium?," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 18(2), pages 209-226, March.
    12. Karna Basu, 2011. "Hyperbolic Discounting and the Sustainability of Rotational Savings Arrangements," American Economic Journal: Microeconomics, American Economic Association, vol. 3(4), pages 143-171, November.
    13. Loic Sadoulet, 2002. "Incorporating Insurance Provisions in Microfinance Contracts: Learning from Visa®?," WIDER Working Paper Series DP2002-56, World Institute for Development Economic Research (UNU-WIDER).
    14. Heemskerk, Marieke & Norton, Anastasia & de Dehn, Lise, 2004. "Does Public Welfare Crowd Out Informal Safety Nets? Ethnographic Evidence from Rural Latin America," World Development, Elsevier, vol. 32(6), pages 941-955, June.
    15. Raj Chetty & Emmanuel Saez, 2010. "Optimal Taxation and Social Insurance with Endogenous Private Insurance," NBER Chapters, in: Income Taxation, Trans-Atlantic Public Economics Seminar (TAPES), pages 85-114, National Bureau of Economic Research, Inc.
    16. Andrey Aistov & Ekaterina Aleksandrova & Christopher J. Gerry, 2021. "Voluntary private health insurance, health-related behaviours and health outcomes: evidence from Russia," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 22(2), pages 281-309, March.
    17. AMANKWAH, ERNEST & Gockel, Fritz Augustine & Osei-Assibey, Eric, 2019. "Pareto Superior dimension of Rotating Savings and Credit Associations (ROSCAs) in Ghana: Evidence from Asunafo North Municipality of Ghana," MPRA Paper 96308, University Library of Munich, Germany.
    18. Andreas Million & Regina T. Riphahn & Achim Wambach, 2003. "Incentive effects in the demand for health care: a bivariate panel count data estimation," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(4), pages 387-405.
    19. Patrick Bajari & Han Hong & Ahmed Khwaja, 2006. "Moral Hazard, Adverse Selection and Health Expenditures: A Semiparametric Analysis," NBER Working Papers 12445, National Bureau of Economic Research, Inc.
    20. Kristina Czura & Stefan Klonner, 2018. "Financial Market Responses to a Natural Disaster: Evidence from Local Credit Networks and the Indian Ocean Tsunami," CESifo Working Paper Series 7354, CESifo.

    More about this item

    Keywords

    health insurance;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:chy:respap:188chedp. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Gill Forder (email available below). General contact details of provider: https://edirc.repec.org/data/chyoruk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.