Moral hazard and selection among the poor: Evidence from a randomized experiment

Jörg L. Spenkuch*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

19 Scopus citations

Abstract

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 selection on observables 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.

Original languageEnglish (US)
Pages (from-to)72-85
Number of pages14
JournalJournal of Health Economics
Volume31
Issue number1
DOIs
StatePublished - Jan 2012

Keywords

  • Adverse selection
  • Health insurance
  • Moral hazard
  • Seguro Popular
  • Self-protection

ASJC Scopus subject areas

  • Health Policy
  • Public Health, Environmental and Occupational Health

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