Spenkch, Jörg L. (2011): Adverse selection and moral hazard among the poor: evidence from a randomized experiment.
Download (3366Kb) | Preview
Not only does economic theory predict high-risk individuals to be more likely to purchase insurance, but insurance coverage is also thought to crowd out precautionary activities. In spite of stark theoretical predictions, there is conflicting empirical evidence on adverse selection, and evidence on ex ante moral hazard is very scarce. Using data from the Seguro Popular Experiment in Mexico, this paper documents patterns of adverse selection into health insurance as well as the existence of non-negligible ex ante moral hazard. More specifically, the findings indicate that (i) agents in poor self-assessed health prior to the intervention have, all else equal, a higher propensity to take up insurance; and (ii) insurance coverage reduces the demand for self-protection in the form of preventive care. Curiously, however, individuals do not sort based on objective measures of their health.
|Item Type:||MPRA Paper|
|Original Title:||Adverse selection and moral hazard among the poor: evidence from a randomized experiment|
|Keywords:||health insurance, adverse selection, moral hazard|
|Subjects:||I - Health, Education, and Welfare > I1 - Health > I11 - Analysis of Health Care Markets
D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D82 - Asymmetric and Private Information; Mechanism Design
I - Health, Education, and Welfare > I1 - Health > I10 - General
|Depositing User:||Jörg L. Spenkuch|
|Date Deposited:||12. Jun 2011 00:43|
|Last Modified:||14. Feb 2013 08:27|
Abbring, Jaap H., Pierre-André Chiappori, and Tibor Zavaldi (2008). “Better Safe than Sorry? Ex Ante and Ex Post Moral Hazard in Dynamic Insurance Data,” CentER Discussion Paper No. 2008-77.
Abbring, Jaap H., Pierre-André Chiappori, and Jean Pinquet (2003). “Moral Hazard and Dynamic Insurance Data,” Journal of the European Economic Association, 1, 767-820.
Angrist, Joshua D., Guido W. Imbens, and Donald B. Rubin (1996). “Identification of Causal Effects Using Instrumental Variables,” Journal of the American Statistical Association, 91, 444-455.
Arrow, Kenneth J. (1963). “Uncertainty and the Welfare Economics of Medical Care,” American Economic Review, 53, 941-973.
Attanasio, Orazio, P., Costas Meghir, Ana Santiago (2011). “Education Choices in Mexico: Using a Structural Model and a Randomized Experiment to Evaluate Progresa,” forthcoming in Review of Economic Studies.
Akerlof, George A. (1970). “The Market for ‘Lemons’: Quality Uncertainty and the Market Mechanism,” Quarterly Journal of Economics, 84, 488-500.
Barros, Rodrigo (2008). “Wealthier But Not Much Healthier: Effects of a Health Insurance Program for the Poor in Mexico,” Unpublished Manuscript. Stanford University.
Bleich, Sara N., David M. Cutler, Alyce S. Adams, Rafael Lozano, and Christopher J. Murray (2007). “Impact of Insurance and Supply of Health Professionals on Coverage and Treatment for Hypertension in Mexico: Population Based Study,” British Medical Journal, 335, 875.
Card, David, Carlos Dobkin, and Nicole Maestas (2008). “The Impact of Nearly Universal Insurance Coverage on Health Care: Evidence from Medicare,” American Economic Review 98, 2242-2258
Cawley, John, and Tomas Philipson (1999). “An Empirical Examination of Information Barriers to Trade in Insurance,” American Economic Review, 89, 827-846.
Chiappori, Pierre-André, and Bernard Salanié (2000). “Testing for Asymmetric Information in Insurance Markets,” Journal of Political Economy, 108, 56-78.
Chiappori, Pierre-André, and Bernard Salanié (2003). “Testing Contract Theory: A Survey of some Recent Work,” (pp. 115-149) in Mathias Dewatripont, Lars P. Hansen, and Stephen J. Turnovsky, eds., Advances in Economics and Econometrics, Cambridge, UK: Cambridge University Press.
Chiappori, Pierre-André, Bruno Julien, Bernard Salanié, and François Salanié (2006). “Asymmetric Information in Insurance: General Testable Implication,” RAND Journal of Economics, 37, 783-798.
Cohen, Alma, and Liran Einav (2007). “Estimating Risk Preferences from Deductible Choice,” American Economic Review, 97, 745-788.
Cutler, David M., and Richard J. Zeckhauser (2000). “The Anatomy of Health Insurance,” (pp. 563-643) in Anthony J. Culyer and Joseph P. Newhouse, eds., Handbook of Health Economics, Amsterdam: Elsevier.
de Meza, David, and David C. Webb (2001). “Advantageous Selection in Insurance Markets,” RAND Journal of Economics, 32, 249-262.
Ehrlich, Isaac, and Gary S. Becker (1972). “Market Insurance, Self-Insurance, and Self-Protection,” Journal of Political Economy, 80, 623-648.
Einav, Liran, Amy Finkelstein, and Paul Schrimpf (2010). “Optimal Mandates and The Welfare Cost of Asymmetric Information: Evidence from the U.K. Annuity Market,” forthcoming in Econometrica.
Fang, Hanming, Michael P. Keane, and Dan Silverman (2008). “Sources of Advantageous Selection: Evidence from the Medigap Insurance Market,” Journal of Political Economy, 116, 303-350.
Finkelstein, Amy, and Kathleen McGarry (2006). “Multiple Dimensions of Private Information: Evidence from the Long-Term Care Insurance Market,” American Economic Review, 96, 938-958.
Finkelstein, Amy, and James Poterba (2002). “Selection Effects in the Market for Individual Annuities: New Evidence from the United Kingdom,” Economic Journal, 112, 28-50.
Finkelstein, Amy, and James Poterba (2004). “Adverse Selection in Insurance Markets: Policyholder Evidence from the U.K. Annuity Market,” Journal of Political Economy, 112, 183-208.
Frenk, Julio, Eduardo González-Pier, Octavio Gómez-Dentéz, Miguel A. Lezana, and Felicia M. Knaul (2006). “Comprehensive Reform to Improve Health System Performance in Mexico,” Lancet, 368, 1524-1534.
Frisch, Ragnar, and Frederick V. Waugh (1933). “Partial Time Regressions as Compared with Individual Trends,” Econometrica, 1, 387-401.
Gakido, Emmanuela, Rafael Lozano, Eduardo González-Pier, Jesse Abbott-Klafter, Jeremy T. Barofsky, Chloe Bryson-Cahn, Dennis M. Feehan, Dianna K. Lee, Hector Hernández-Llamas, Christopher and J.L. Murray (2006). “Assessing the Effect of the 2001-06 Mexican Health Reform: An Interim Report Card,” Lancet, 368, 1920-1935.
Gertler, Paul J. (2004) “Do Conditional Cash Transfers Improve Child Health? Evidence from PROGRESA’s Control Randomized Experiment,” American Economic Review, 94, 336-341.
Holmström, Bengt, and Paul Milgrom (1991). “Multi-Task Principal-Agent Analyses: Incentive Contracts, Asset Ownership, and Job Design,” Journal of Law, Economics, and Organization 7, 24-52.
Homedes, Nuria, and Antonio Ugalde (2009). “Twenty-Five Years of Convoluted Health Reforms in Mexico,” PLoS Medicine, 6, e1000124. Imbens, Guido W. and Joshua D. Angrist (1994). “Identification and Estimation of Local Average Treatment Effects,” Econometrica, 62, 467-475.
King, Gary, Emmanuela Gakidou, Nirmala Ravishankar, Ryan T. Moore, Jason Lakin, Manett Vargas, Martha María Téllez-Rojo, Juan Eugenio Hernández-Ávila, Mauricio Hernández-Ávila, and Hector Hernández Llamas (2007). “A ‘Politically Robust’ Experimental Design for Public Policy Evaluation, with Application to the Mexican Universal Health Insurance Program,” Journal of Policy Analysis and Management, 26, 479-506.
King, Gary, Emmanuela Gakidou, Kosuke Imai, Jason Lakin, Ryan T. Moore, Clayton Nall, Nirmala Ravishankar, Manett Vargas, Martha María Téllez-Rojo, Juan Eugenio Hernández-Ávila, Mauricio Hernández-Ávila, and Hector Hernández Llamas (2009a). “Public Policy for the Poor? A Randomised Assessment of the Mexican Universal Health Insurance Programme,” Lancet, 373, 1447-1454.
King, Gary, Emmanuela Gakidou, Kosuke Imai, Jason Lakin, Ryan T. Moore, Clayton Nall, Nirmala Ravishankar, Manett Vargas, Martha María Téllez-Rojo, Juan Eugenio Hernández-Ávila, Mauricio Hernández-Ávila, and Hector Hernández Llamas (2009b). “Replication data for: Public Policy for the Poor? A Randomised Assessment of the Mexican Universal Health Insurance Programme,” available online at http://hdl.handle.net/1902.1/11044
Klick, Jonathan, Thomas Stratmann (2007). “Diabetes Treatment and Moral Hazard,” Journal of Law and Economics, 50, 519-538.
Kling, Jeffrey R., Jeffrey B. Liebman, and Lawrence F. Katz (2007). “Experimental Analysis of Neighborhood Effects,” Econometrica, 75, 83-119.
Knox, Melissa A. (2008). “Health Insurance for All: An Evaluation of Mexico’s Seguro Popular Program.” Unpublished Manuscript. University of California, Berkeley.
Lillard, Lee A., Willard G. Manning, Christine E. Peterson, Nicole Lurie, George A. Goldberg, and Charles E. Phelps (1986). Preventive Medical Care: Standards, Usage, and Efficacy. Santa Monica, CA: RAND Corporation.
National Institutes of Health (1998). Clinical Guidelines on the Identification, Evaluation, and Treatment of Overweight and Obesity in Adults. NIH Publication No. 98-4083
National Institutes of Health (2002). Third Report of the National Cholesterol Education Program (NCEP) Expert Panel on Detection, Evaluation, and Treatment of High Blood Cholesterol in Adults (Adult Treatment Panel III). NIH Publication No. 02-5215
National Institutes of Health (2004). The Seventh Report of the Joint National Committee on Prevention, Detection, Evaluation, and Treatment of High Blood Pressure. NIH Publication No. 04-5230.
Newhouse, Joseph P., and the Insurance Experiment Group (1993). Free For All? Lessons from the RAND Health Insurance Experiment. Cambridge, MA: Harvard University Press.
Organisation for Economic Co-operation and Development (2005). OECD Reviews of Health Systems: Mexico. Paris: OECD Publications.
Pauly, Mark V. (1974) “Overinsurance and Public Provision of Insurance: The Roles of Moral Hazard and Adverse Selection,” Quarterly Journal of Economics, 88, 44-62.
Rothschild, Micheal, and Joseph Stiglitz (1976). “Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information,” Quarterly Journal of Economics, 90, 629-649.
Sosa-Rubi, Sandra G., Omar Galárraga, and Jeffrey E. Harris (2009). “Heterogeneous Impact of the ‘Seguro Popular’ Program on the Utilization of Obstetrical Services in Mexico, 2001-2006: A Multinomial Probit Model with a Discrete Endogenous Variable,” Journal of Health Economics, 28, 20-34.
Todd, Petra, and Kenneth I. Wolpin (2006). “Assessing the Impact of a School Subsidy Program in Mexico: Using a Social Experiment to Validate a Dynamic Behavioral Model of Child Schooling and Fertility,” American Economic Review, 96, 1384-1417.
World Health Organization (2000). Obesity: Preventing and Managing the Global Epidemic. Technical Report Series No 894. Geneva: World Health Organization.
Zeckhauser, Richard (1970). “Medical Insurance: A Case Study of the Tradeoff between Risk Spreading and Appropriate Incentives,” Journal of Economic Theory, 2, 10-26.
Zweifel, Peter, and Willard G. Manning (2000). “Moral Hazard and Consumer Incentives in Health Care,” (pp. 409-459) in Anthony J. Culyer and Joseph P. Newhouse, eds., Handbook of Health Economics, Amsterdam: Elsevier.
Available Versions of this Item
- Adverse selection and moral hazard among the poor: evidence from a randomized experiment. (deposited 12. Jun 2011 00:43) [Currently Displayed]