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Subjective expectations of medical expenditures and insurance in rural Ethiopia

Author

Listed:
  • Debebe, Z.Y.
  • O'Donnell, O.A.
  • Mebratie, A.D.
  • Alemu, G.
  • Bedi, A.S.

Abstract

Little is known about perceptions of medical expenditure risks despite their presumed relevance to health insurance demand. This paper reports on a unique elicitation of subjective probabilities of medical expenditures from rural Ethiopians who are offered the opportunity to purchase health insurance. We find that expectations are positively correlated with past expenses to a degree that exceeds the serial correlation in realized expenditures, suggesting overestimation of persistence and underestimation of the potential gains from insurance. Despite the fact that forecast expenditures do predict realized expenditures to some extent, there is no evidence that expectations influence the decision to take out health insurance, although plans to insure are positively related to the perceived dispersion of medical expenses.

Suggested Citation

  • Debebe, Z.Y. & O'Donnell, O.A. & Mebratie, A.D. & Alemu, G. & Bedi, A.S., 2015. "Subjective expectations of medical expenditures and insurance in rural Ethiopia," ISS Working Papers - General Series 611, International Institute of Social Studies of Erasmus University Rotterdam (ISS), The Hague.
  • Handle: RePEc:ems:euriss:79148
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    References listed on IDEAS

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    More about this item

    Keywords

    subjective probability; medical expenditure; out-of-pocket payments; adverse selection; health insurance; Ethiopia;

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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