Subjective Expectations of Medical Expenditures and Insurance in Rural Ethiopia

Zelalem Yilma, Owen O’Donnell, Anagaw Mebratie, Getnet Alemu and Arjun Bedi
Additional contact information
Zelalem Yilma: Erasmus University Rotterdam
Owen O’Donnell: Erasmus University Rotterdam
Anagaw Mebratie: Erasmus University Rotterdam
Getnet Alemu: Addis Ababa University, Ethiopia
Authors registered in the RePEc Author Service: Owen O'Donnell and Zelalem Yilma ()

No 15-120/V, Tinbergen Institute Discussion Papers from Tinbergen Institute

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.

Keywords: Subjective probability; medical expenditure; out-of-pocket payments; adverse selection; health insurance; Ethiopia (search for similar items in EconPapers)
JEL-codes: D82 D84 I13 O12 (search for similar items in EconPapers)
Date: 2015-10-26
New Economics Papers: this item is included in nep-hea and nep-ias
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Chapter: Subjective Expectations of Medical Expenditures and Insurance in Rural Ethiopia (2018)
Working Paper: Subjective expectations of medical expenditures and insurance in rural Ethiopia (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:20150120

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