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Health Insurance and Life Style Choices: Identifying the Ex Ante Moral Hazard

  • Stanciole, Anderson

    (The University of York)

There is extensive debate in the literature about the practical significance of the concept of ex-ante moral hazard. This paper uses data from the 1999-2003 PSID waves to estimate a structural model of individual choice of insurance coverage and four life style related decisions: heavy smoking, heavy drinking, sedentarism and obesity. The results show that health insurance has significant incentive effects on life style choices, increasing the propensity to heavy smoking, sedentarism and obesity. Somewhat surprisingly, however, health insurance decreases the propensity to heavy drinking. There is also significant correlation among the errors of each equation. The results might also have implications for the design of health financing policies.

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Paper provided by IRISS at CEPS/INSTEAD in its series IRISS Working Paper Series with number 2007-10.

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Length: 36 pages
Date of creation: Nov 2007
Date of revision:
Publication status: Published in The Geneva Papers on Risk and Insurance Issues and Practice, vol.33 (2008), pp. 627–644. doi:10.1057/gpp.2008.27
Handle: RePEc:irs:iriswp:2007-10
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  16. Jerome Adda & Valérie Lechene, 2004. "On the identification of the effect of smoking on mortality," CeMMAP working papers CWP13/04, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  17. Jay Bhattacharya & Neeraj Sood, 2005. "Health Insurance and the Obesity Externality," NBER Working Papers 11529, National Bureau of Economic Research, Inc.
  18. Amy Finkelstein & Kathleen McGarry, 2003. "Private Information and its Effect on Market Equilibrium: New Evidence from Long-Term Care Insurance," NBER Working Papers 9957, National Bureau of Economic Research, Inc.
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