Adverse selection and moral hazard among the poor: evidence from a randomized experiment

Jörg L. Spenkch
Authors registered in the RePEc Author Service: Jörg L. Spenkuch

MPRA Paper from University Library of Munich, Germany

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 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.

Keywords: health insurance; adverse selection; moral hazard (search for similar items in EconPapers)
JEL-codes: D82 I10 I11 (search for similar items in EconPapers)
Date: 2011-05
New Economics Papers: this item is included in nep-cta, nep-ias and nep-mfd
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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https://mpra.ub.uni-muenchen.de/35428/3/MPRA_paper_35428.pdf revised version (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:31443

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