Something in the Air: Pollution and the Demand for Health Insurance
Tom Y Chang,
Wei Huang and
Review of Economic Studies, 2018, vol. 85, issue 3, 1609-1634
We find that daily air pollution levels have a significant effect on the decision to purchase or cancel health insurance in a manner inconsistent with rational choice theory. A one standard deviation increase in daily air pollution leads to a 7.2% increase in the number of insurance contracts sold that day. Conditional on purchase, a one standard deviation decrease in air pollution during the cooling-off (i.e. cost-free cancellation) period relative to the order-date level increases the return probability by 4.0%. We explore a range of potential mechanism and find the most support for projection bias and salience.
Keywords: Projection bias; Salience (search for similar items in EconPapers)
JEL-codes: D12 D91 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:oup:restud:v:85:y:2018:i:3:p:1609-1634.
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