Risk Attitudes and the Demand for Private Health Insurance: The Importance of ‘Captive Preferences’

21 Pages Posted: 9 Nov 2009

See all articles by Joan Costa-Font

Joan Costa-Font

London School of Economics & Political Science (LSE)

Jaume García-Villar

affiliation not provided to SSRN

Abstract

Captivity to a mainstream public insurer, is hypothesized to constrain the choice of purchasing private health insurance, by influencing risk attitudes. Namely, risk averse individuals are more likely to stay captive to the National Health System (NHS). To empirically test this hypothesis we use a small scale database from Catalonia to explore the determinants of private health insurance (PHI) purchase under different forms of captivity along with a measure of risk attitudes. Our results confirm that the captivity corrections are significant and can potentially bias the estimates of the demand for PHI. Risk aversion increases the probability of an individual being captive to the NHS. The latter suggests a potential behavioural (or cultural) mechanism to isolate the influence of risk attitudes on the demand for PHI in publicly financed health systems.

Suggested Citation

Costa-Font, Joan and García-Villar, Jaume, Risk Attitudes and the Demand for Private Health Insurance: The Importance of ‘Captive Preferences’. Annals of Public and Cooperative Economics, Vol. 80, Issue 4, pp. 499-519, December 2009. Available at SSRN: https://ssrn.com/abstract=1501364 or http://dx.doi.org/10.1111/j.1467-8292.2009.00396.x

Joan Costa-Font (Contact Author)

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

HOME PAGE: http://https://joancostaifont.org/

Jaume García-Villar

affiliation not provided to SSRN

No Address Available

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